Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) 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% $ 400,000 IT Using Department Operations 0 0 $ 820,000 0 30% 0 Retail 70% 308 10% $ 1,660,000 $ 3,860,000 Commercial 30% 308 30% $ 2,410,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method.
Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1) 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% $ 400,000 IT Using Department Operations 0 0 $ 820,000 0 30% 0 Retail 70% 308 10% $ 1,660,000 $ 3,860,000 Commercial 30% 308 30% $ 2,410,000 Required: a. Allocate the service department costs to the two operating departments using the reciprocal method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 11-60 (Algo) Cost Allocation: Step and Reciprocal Methods (LO 11-1)
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
From:
Transactions
IT
Operations
Transactions
Total
0
10%
60%
$ 400,000
IT
Costs Operations
Using Department
Operations
0
$ 820,000
0
30%
0
Allocated to:
Transactions
Retail
Required:
a. Allocate the service department costs to the two operating departments using the reciprocal method.
70%
308
10%
$ 1,660,000 $ 3,860,000
Retail Commercial
Commercial
30%
30%
30%
$ 2,410,000
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