Allocating service centers’ costs to operating departments— step method Shepard Consulting, LLP, has three operating departments: tax, estate planning, and small business. The company’s internal accounting and maintenance departments support the operating departments. Moreover, the maintenance department also supports the internal accounting department. Other relevant information follows: 

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Shepard allocates its maintenance cost based on the square footage of each department’s office space. The firm allocates the internal accounting cost based on each department’s operating revenue. 

Required

a. Allocate the maintenance cost to the operating and internal accounting departments.

b. After allocating the maintenance cost, allocate the internal accounting cost to the three operating departments.

c. Compute the total allocated cost of the service departments for each operating department. 

Annual Cost* Square Feet Operating Revenue Tax Estate planning Small business Internal accounting Maintenance 8,000 2,000 4,000 1,000 1,000 $5,000,000 2,000,000 3,000,000 690,000 450,000 *The annual cost figures do not include costs allocated from service departments. $8,000,000 6,500,000