Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost Transactions 0 10% 60% $ 370,000 IT Using Department Operations 0 0 0 $ 790,000 0 30% 0 $ 1,630,000 Retail 70% 30% 10% $ 3,830,000 Commercial 30% 30% 30% $ 2,380,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information
Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded:
Supplying
Department
Transactions
IT
Operations
Direct cost
IT
From:
Transactions
Operations
Transactions
Total
0
10%
60%
$ 370,000
IT
Costs Operations
Using Department
Operations
0
0
0
$ 790,000
Allocated to:
Transactions
0
30%
$
$ 1,630,000
Required:
a. Allocate the service department costs to the two operating departments using the reciprocal method.
Retail
0 $
$ 3,830,000
Retail Commercial
70%
30%
10%
0
Commercial
30%
30%
30%
$ 2,380,000
Transcribed Image Text:Dunedin Bank has two operating departments (Retail and Commercial) and three service departments: Operations, Information Technology (IT), and Transactions. For the last period, the following costs and service department usage ratios were recorded: Supplying Department Transactions IT Operations Direct cost IT From: Transactions Operations Transactions Total 0 10% 60% $ 370,000 IT Costs Operations Using Department Operations 0 0 0 $ 790,000 Allocated to: Transactions 0 30% $ $ 1,630,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. Retail 0 $ $ 3,830,000 Retail Commercial 70% 30% 10% 0 Commercial 30% 30% 30% $ 2,380,000
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