value 3.07 points Problem 11-56 Allocate Service Department Costs: Direct and St

Question

value 3.07 points Problem 11-56 Allocate Service Department Costs: Direct and Step Methods (LO 11-2, 3) 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: Administration CommunicationsFacilities Deposits 446,000 249,900 Loans Direct costs Employee hours Number of employees Square footage occupied S230,000 23,500 6 4,800 S270,000 34,000 18 13,200 $251,000 $8,270,000 $5,200,000 386,000 150 202,600 20,500 6 5,200 210 The costs of the service departments are allocated on the following bases: Administration, employee-hours; Communications, number of employees, and Facilities, square footage occupied. (Do not round intermediate calculations.)

Explanation / Answer

Allocation using Direct method: Admin Cmmunication Facilities Deposits Loans Direct cost 230000 270000 251000 8270000 5200000 Add: Cost of Communication -270000 157500 112500 (in deposits and loans in the ratio of 210:150) Add: Cost of Facilities -251000 138619 112381 (in deposits and loans in the ratio of 249900:202600) Add: Cost of Admin -230000 123293 106707 (in deposits and loans in ratio of 446000:386000) Total cost 0 0 0 8689412 5531588 Req-A: Communication deptt to Deposits department: 157500 Req B: Admin department to loans deptt: 106707 Allocation based on Step method Admin Cmmunication Facilities Deposits Loans Direct cost 230000 270000 251000 8270000 5200000 Add: Facilities cost 2561 7042 -251000 133315 108082 (in the ratio of square footage) Add: Communication cost 4541 -277042 0 158959 113542 ($ 277042 in ratio of employees number) Add: Cost of Admin -237102 127100 110002 ($ 237102 in ratio of employee hours) Total cost 0 0 0 8689374 5531626 Req c: Facilities dept cost allocated to coomunication deptt 7042 Req d: Communication depptt to Facilities : 0

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