Exercise 17-18 Step-Down Method of Service Department Cost Allocation; Bank (LO 17-1) Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the Computing Department. The bank has two other departments that directly service customers, the Deposit Department and the Loan Department. The usage of the two service departments' output for the year is as follows: Provider of Service Computing User of Service HR HR 15% Computing Deposit 10% 60% 50% Loan 30% 35% The budgeted costs in the two service departments for the year are as follows: $153,000 229,500 HR Computing Required: Use the step-down method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. Tuscaloosa National Bank allocates the costs of the HR Department first. (Do not round intermediate calculations.) Deposit Loan Allocation of HR Department costs Allocation of Computing Department costs Total costs allocated to each department 91,800 s 45,900 91,800 S 45,900

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
**Exercise 17-18 Step-Down Method of Service Department Cost Allocation; Bank (LO 17-1)**

Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the Computing Department. The bank also has two other departments that directly service customers, the Deposit Department and the Loan Department. The usage of the two service departments’ output for the year is as follows:

**Table: Usage of Service Departments**

| User of Service | Provider of Service               |
| --------------- | --------------------------------- |
|                 | HR               | Computing     |
| HR              | –                | 15%           |
| Computing       | 10%              | –             |
| Deposit         | 60%              | 50%           |
| Loan            | 30%              | 35%           |

The budgeted costs in the two service departments for the year are as follows:

- **HR**: $153,000  
- **Computing**: $229,500  

**Required:**

Use the step-down method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. Tuscaloosa National Bank allocates the costs of the HR Department first. *(Do not round intermediate calculations.)*

**Table: Allocation of Costs**

|                          | Deposit | Loan  |
|--------------------------|---------|-------|
| Allocation of HR Department costs  | $91,800 | $45,900 |
| Allocation of Computing Department costs  | –     | –     |
| Total costs allocated to each department   | $91,800 | $45,900 |

This exercise involves using the step-down method for cost allocation, where costs are allocated from service departments to production departments in a sequential manner. The table shows how the HR department's costs are distributed between the Deposit and Loan departments.
Transcribed Image Text:**Exercise 17-18 Step-Down Method of Service Department Cost Allocation; Bank (LO 17-1)** Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the Computing Department. The bank also has two other departments that directly service customers, the Deposit Department and the Loan Department. The usage of the two service departments’ output for the year is as follows: **Table: Usage of Service Departments** | User of Service | Provider of Service | | --------------- | --------------------------------- | | | HR | Computing | | HR | – | 15% | | Computing | 10% | – | | Deposit | 60% | 50% | | Loan | 30% | 35% | The budgeted costs in the two service departments for the year are as follows: - **HR**: $153,000 - **Computing**: $229,500 **Required:** Use the step-down method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. Tuscaloosa National Bank allocates the costs of the HR Department first. *(Do not round intermediate calculations.)* **Table: Allocation of Costs** | | Deposit | Loan | |--------------------------|---------|-------| | Allocation of HR Department costs | $91,800 | $45,900 | | Allocation of Computing Department costs | – | – | | Total costs allocated to each department | $91,800 | $45,900 | This exercise involves using the step-down method for cost allocation, where costs are allocated from service departments to production departments in a sequential manner. The table shows how the HR department's costs are distributed between the Deposit and Loan departments.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Value Chain Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education