Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating departments: Residential and Commercial. A summary of costs and other data for each department prior to allocation of service department costs for the latest period follows: Number of IS service tickets Number of employees Square footage occupied IS 170 Personnel 200 Administration Residential Commercial 155 1,410 115 3,900 120 8,000 107 3,800 138 16,100 940 162 69,500 The costs of the service departments and the allocation basis for each department follow. Department Direct Cost Allocation Base Information Systems (IS) $ 33,000 Personnel 40,000 IS service tickets Employees Administration 36,700 Square footage occupied Required: a. Assume that the company allocates service department costs to production departments using the direct method. What amount of Information Systems (IS) Department costs will be allocated to the Commercial Department? b. Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department? c. Assuming that the company allocates service department costs to other departments using the step method (starting with Administration and then IS), what amount of Administration Department costs is allocated to the IS Department? d. Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department? Note: Do not round intermediate calculations. Amount < Required A Required C >
Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating departments: Residential and Commercial. A summary of costs and other data for each department prior to allocation of service department costs for the latest period follows: Number of IS service tickets Number of employees Square footage occupied IS 170 Personnel 200 Administration Residential Commercial 155 1,410 115 3,900 120 8,000 107 3,800 138 16,100 940 162 69,500 The costs of the service departments and the allocation basis for each department follow. Department Direct Cost Allocation Base Information Systems (IS) $ 33,000 Personnel 40,000 IS service tickets Employees Administration 36,700 Square footage occupied Required: a. Assume that the company allocates service department costs to production departments using the direct method. What amount of Information Systems (IS) Department costs will be allocated to the Commercial Department? b. Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department? c. Assuming that the company allocates service department costs to other departments using the step method (starting with Administration and then IS), what amount of Administration Department costs is allocated to the IS Department? d. Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department? Note: Do not round intermediate calculations. Amount < Required A Required C >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating
departments: Residential and Commercial. A summary of costs and other data for each department prior to allocation of service
department costs for the latest period follows:
Number of IS service tickets
Number of employees
Square footage occupied
IS
170
Personnel
200
Administration Residential
Commercial
155
1,410
115
3,900
120
8,000
107
3,800
138
16,100
940
162
69,500
The costs of the service departments and the allocation basis for each department follow.
Department
Direct Cost
Allocation Base
Information Systems (IS)
$ 33,000
Personnel
40,000
IS service tickets
Employees
Administration
36,700
Square footage occupied
Required:
a. Assume that the company allocates service department costs to production departments using the direct method. What amount of
Information Systems (IS) Department costs will be allocated to the Commercial Department?
b. Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the
Residential Department?
c. Assuming that the company allocates service department costs to other departments using the step method (starting with
Administration and then IS), what amount of Administration Department costs is allocated to the IS Department?
d. Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to Administration?
Complete this question by entering your answers in the tabs below.
Required A Required B Required C Required D
Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the
Residential Department?
Note: Do not round intermediate calculations.
Amount
< Required A
Required C >
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Step 1: Explain cost allocation
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VIEWStep 3: Allocate cost of personal department to residential department by direct method
VIEWStep 4: Allocating cost of service department to operating department by Step method
VIEWStep 5: Allocate cost of personal department to residential department by step method
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