Tuscaloosa National Bank has two service departments, the Human Resources (HR) D

Question

Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the Computing Department. The bank has two other departments that directly service customers, the Deposit Department and the Loan Department. The usage of the two service departments’ output for the year is as follows

Required: Use the reciprocal-services method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. (Do not round your intermediate calculations and round final answers to the nearest dollar amount.)

Provider of Service User of Service HR Computing Deposit Loan HR Computing 25% 25% 65% 10% 65% 10% The budgeted costs in the two service departments for the year are as follows HR Computing $599,000 828, 500

Explanation / Answer

HR department costs = 599,000 + (0.25) * computing department costs

Computing department costs = 828,500 + (0.25) * HR department costs

HR department costs = 599,000 + (0.25) * [ 828,500 + (0.25) * HR department costs]

HR department costs = 599,000 + 207,125 + 0.0625 * HR department costs

0.9375 * HR department costs = 806,125

HR department costs = 859,867

Computing department costs = 828,500 + (0.25) *  859,867

Computing department costs = 1,043,467

558,913

(859,867*65%)

85,986

(859,867*10%)

214,968

(859,867*25%)

678,253

(1,043,467*65%)

104,347

(1,043,467*10%)

260,867

(1,043,467*25%)

Deposit Loan HR Computing HR

558,913

(859,867*65%)

85,986

(859,867*10%)

(859,867)

214,968

(859,867*25%)

Computing

678,253

(1,043,467*65%)

104,347

(1,043,467*10%)

260,867

(1,043,467*25%)

(1,043,467) 1,237,166 190,333

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