Harry Dishman owns and operates Harry\'s Septic Service and Legal Advice. Harry\

Question

Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:

Clerical:

Variable cost: expected number of work orders processed

Fixed cost: long-run average number of work orders processed

Janitorial:

Variable cost: labor hours

Fixed cost: square footage of space occupied

Average and expected activity levels for next month (June) are as follows:

       
Expected costs in the service departments for June are as follows:
  

Under the direct method of allocation, what is the total amount of service cost allocated to the Legal Advice operation for June? (Round all calculations to the nearest whole dollar.)

Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:

Clerical:

Variable cost: expected number of work orders processed

Fixed cost: long-run average number of work orders processed

Janitorial:

Variable cost: labor hours

Fixed cost: square footage of space occupied

Average and expected activity levels for next month (June) are as follows:

Explanation / Answer

Answer:

[(43/111)* $13,800] + [(38/172) *$10200] + [(1020/1760) $6000] + [(2380/4360) $2600]

=5345.95+2253.49+3477.27+1419.27

= $12496

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