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: Operations Transactions Total Transactions 8 10% 70% $ 310,000 IT Using Department Operations Costs Operations S 250.000 $ 750,000 670,000 x 1.510,000 x 8 8 8 $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. Answer is complete but not entirely correct. Allocated to: Transactions 0 30% 8 $ 250,000 $ 2,233,333 x $ 1,570,000 $ 3,770,000 Retail Retail Commercial 833,333 X x 0X S 0x 0x 0 S 70% 30% 10% 833,333 Commercial 30% 38% 28% $ 2,320,000
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: Operations Transactions Total Transactions 8 10% 70% $ 310,000 IT Using Department Operations Costs Operations S 250.000 $ 750,000 670,000 x 1.510,000 x 8 8 8 $ 730,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method. Answer is complete but not entirely correct. Allocated to: Transactions 0 30% 8 $ 250,000 $ 2,233,333 x $ 1,570,000 $ 3,770,000 Retail Retail Commercial 833,333 X x 0X S 0x 0x 0 S 70% 30% 10% 833,333 Commercial 30% 38% 28% $ 2,320,000
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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