Exercise 11-33 (Algo) Cost Allocation: Direct Method (LO 11-1)Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (Westand East). The usage data for each of the service departments for the previous period follow:ITAccountingHRIT8%10%The direct costs of the service departments in the previous period were $91,750 for IT, $119,000 for Accounting, and $162,500 for HR.HR allocationTotal costs allocatedAccounting HR West East81%40%20%40%0%40%60%10%60%20%Required:Use the direct method to allocate the service department costs to the production departments.Note: Amounts to be deducted should be indicated by a minus sign. Do not round Intermediate calculations.Service department costsIT allocationAccounting allocationITAccountingHRWestEast

Lets understand the basics.Service department cost can be allocated using,(1) Direct method(2) Step down method(3) Reciprocal methodIn direct method, service department cost gets allocated directly to production department. In this method, service department costs are not allocated to another service department.So here in this case, ITAccounting HRWestEastService department costs91,750119,000162,500IT allocation (40:40)-91,75045,87545,875Accounting (40:60)-119,00047,60071,400HR (60:20)-162,500121,87540,625Total000215,350157,900Therefore, ITAccounting HRWestEastService department costs91,750119,000162,500IT allocation (40:40)-91,75045,87545,875Accounting (40:60)-119,00047,60071,400HR (60:20)-162,500121,87540,625Total000215,350157,900

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Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (West and East). The usage data for each of the service departments for the previous period follow: IT IT 0% 10% Accounting 0% 10% HR 20% ex IT West East 40% 40% 60% Accounting HR The direct costs of the service departments in the previous period were $91,750 for IT, $119,000 for Accounting, and $162,500 for HR. Required: Use the direct method to allocate the service department costs to the production departments. Note: Amounts to be deducted should be indicated by a minus sign. Do not round Intermediate calculations. 40% 60% 20% Accounting HR West East

Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (West and East). The usage data for each of the service departments for the previous period follow: IT IT 0% 10% Accounting 0% 10% HR 20% ex IT West East 40% 40% 60% Accounting HR The direct costs of the service departments in the previous period were $91,750 for IT, $119,000 for Accounting, and $162,500 for HR. Required: Use the direct method to allocate the service department costs to the production departments. Note: Amounts to be deducted should be indicated by a minus sign. Do not round Intermediate calculations. 40% 60% 20% Accounting HR West East

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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