Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (Wes and East). The usage data for each of the service departments for the previous period follow: IT IT Accounting 0% HR West East 20% 40% 40% Accounting 0% 0% 40% 60% HR 10% 10% 60% 20% 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 step method to allocate the service department costs to the two production departments. Allocate HR costs first, followed by IT, and then Accounting. Note: Amounts to be deducted should be Indicated by a minus sign.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
Accounting
0%
HR
West
East
20%
40%
40%
Accounting
0%
0%
40%
60%
HR
10%
10%
60%
20%
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 step method to allocate the service department costs to the two production departments. Allocate HR costs first, followed by
IT, and then Accounting.
Note: Amounts to be deducted should be Indicated by a minus sign.
Service department costs
HR allocation
IT allocation
Accounting allocation
Total costs allocated
IT
Accounting
HR
West
East
91,750 S
119,000 $
162,500
16,250
(162,500)
97,500
32,500
0
0
S
108,000
S
119,000
S
0
$
97,500
S
32,500
Transcribed Image Text: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 Accounting 0% HR West East 20% 40% 40% Accounting 0% 0% 40% 60% HR 10% 10% 60% 20% 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 step method to allocate the service department costs to the two production departments. Allocate HR costs first, followed by IT, and then Accounting. Note: Amounts to be deducted should be Indicated by a minus sign. Service department costs HR allocation IT allocation Accounting allocation Total costs allocated IT Accounting HR West East 91,750 S 119,000 $ 162,500 16,250 (162,500) 97,500 32,500 0 0 S 108,000 S 119,000 S 0 $ 97,500 S 32,500
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