Chapter 11, Problem 56P

 Allocate Service Department Costs: Direct and Step Methods

 State Financial Corp. has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows:

  The costs of the service departments are allocated on the following bases: Administration, employee-hours; Communications, number of employees; and Facilities, square footage occupied.

Required

Round all final calculations to the nearest dollar.

1. a.      Assume that the bank elects to distribute service department costs to production departments using the direct method. What amount of Communications Department costs is allocated to the IX*posits Department?
2. b.      Assume the same method of allocation as in requirement (a). What amount of Administration Department costs is allocated to the Loans Department?
3. c.       Assuming that the bank elects to distribute service department costs to other departments using the step method (starting with Facilities and then Communications), what amount of Facilities Department costs is allocated to the Communications Department?
4. d.      Assume the same method of allocation as in requirement (c). What amount of Communication Department costs is allocated to Facilities?