Support Department Cost Allocation Fillory Illusion, Inc has two support departments, Human Resources and Janitorial, and two revenue departments, Entertainment and Protection. All costs are regarded as strictly variable. For November, the following is available: Support Department Revenue Departments Human Resources Janitorial Entertainment Protection Direct Costs 2$ 67,000 $20,000 2$ 128,000 $ 115,000 Actual Activity: Employees 20 Service Hours 120 510 170 REQUIRED: 1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Entertainment? What is the total cost allocated to Protection? 2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Human Resources Department cost first. What is the total cost allocated to Entertainment? What is the total cost allocated Protection? 3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments?

Support Department Cost Allocation Fillory Illusion, Inc has two support departments, Human Resources and Janitorial, and two revenue departments, Entertainment and Protection. All costs are regarded as strictly variable. For November, the following is available: Support Department Revenue Departments Human Resources Janitorial Entertainment Protection Direct Costs 2$ 67,000 $20,000 2$ 128,000 $ 115,000 Actual Activity: Employees 20 Service Hours 120 510 170 REQUIRED: 1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Entertainment? What is the total cost allocated to Protection? 2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Human Resources Department cost first. What is the total cost allocated to Entertainment? What is the total cost allocated Protection? 3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments?

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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