Heidaka Trust Corporation has two service departments: actuary and economic anal

Question

Heidaka Trust Corporation has two service departments: actuary and economic analysis. Heidaka also has three operating departments: annuity, fund management, and employee benefit services. The annual costs of operating the service departments are $495,000 for actuary and $675,000 for economic analysis. Heidaka uses the direct method to allocate service center costs to operating departments. Other relevant data follow:

$888,500.00

Required:

Use operating costs as the cost driver for allocating service center costs to operating departments. (Round "Allocation rate" to 2 decimal places and other answers to nearest whole dollar amount.)

b. Use revenue as the cost driver for allocating service center costs to operating departments. (Round "Allocation rate" to 4 decimal places and other answers to nearest whole dollar amount.)

Operating Departments Operating Costs Revenue   Annuity $482,000.00 $840,000.00   Fund management $879,500.00 $1,260,000.00   Employee benefit services

$888,500.00

$1,500,000.00 Allocation of actuary cost: Department Annuity Fund management EBS Total allocated cost Allocation Rate x Weight of BaseAllocated Cost 0 0 0 0

Explanation / Answer

a) Allocation of actuary cost :Total operating cost = 482000+879500+888500 =2250000

ALLocation rate = 495000/2250000

Allocation of econonmic analysis :Allcation rate = 675000 / 2250000 = .30

b) Allocation of actuary cost:Total revenue = 840000+1260000+1500000=3600000

Rate= 495000/ 3600000= .14

Allocation of economic analysis cost

Allocation rate = 675000 / 3600000= .1875

Department Allocation rate * weight of base = Allocated cost Annuity .22 482000 106040 Fund management .22 879500 193490 EBS .22 888500 195470 Total allocated cost 495000

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