Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departme organized according to the special industry each department serves, are health care, retail, and legal services. The billing depa supports only the three operating departments, but the human resources department supports all operating departments and billing department. Other relevant information follows. Number of employees Annual cost* Annual revenue Human Resources 10 $720,000 Health Care 80 Billing $1,428,000 $6,000,000 $9,000,000 20 Legal Services Retail $4,800,000 $2,800,000 $6,200,000 $4,800,000 60 40 *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company the number of employees as the base for allocating human resources department costs and department annual revenue as base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Compton adopts the direct method. The compar the number of employees as the base for allocating the human resources department costs and de ment annual revenue base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method.
Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departme organized according to the special industry each department serves, are health care, retail, and legal services. The billing depa supports only the three operating departments, but the human resources department supports all operating departments and billing department. Other relevant information follows. Number of employees Annual cost* Annual revenue Human Resources 10 $720,000 Health Care 80 Billing $1,428,000 $6,000,000 $9,000,000 20 Legal Services Retail $4,800,000 $2,800,000 $6,200,000 $4,800,000 60 40 *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company the number of employees as the base for allocating human resources department costs and department annual revenue as base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Compton adopts the direct method. The compar the number of employees as the base for allocating the human resources department costs and de ment annual revenue base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departmen
organized according to the special industry each department serves, are health care, retail, and legal services. The billing depart
supports only the three operating departments, but the human resources department supports all operating departments and th
billing department. Other relevant information follows.
Number of employees
Annual cost*
Annual revenue
Req A1
Department
Billing
Human
Resources
10
$720,000 $1,428,000 $6,000,000
Billing
Health Care
Retail
Complete this question by entering your answers in the tabs below.
Req A2
Legal Services
Total
*This is the operating cost before allocating service department costs.
Required
a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company
the number of employees as the base for allocating human resources department costs and department annual revenue as th
base for allocating the billing department costs.
b. Allocate service department costs to operating departments, assuming that Compton adopts the direct method. The company
the number of employees as the base for allocating the human resources department costs and department annual revenue a
base for allocating the billing department costs.
c. Compute the total allocated cost of service centers for each operating department using each allocation method.
Req B1
Allocation
Rate
X
X
XXX
Weight of
Base
20
Req B2
Allocate service department costs to operating departments, assuming that Compton adopts the direct method. The
company uses the number of employees as the base for allocating the human resources department costs.
= $
=
Health
Care
Retail
$4,800,000
$9,000,000 $6,200,000
Allocated
Cost
$
< Req A2
80
Req C1
0
0
0
0
Req C2
60
Legal
Services
40
Req B2 >
$2,800,000
$4,800,000
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