Selecting an appropriate cost driver (What is the base?) Letterman Research Institute has three departments: biology, chemistry, and physics. The institute’s controller wants to estimate the cost of operating each department. He has identified several indirect costs that must be allocated to each department including $11,200 of phone expense, $2,400 of office supplies, $1,120,000 of office rent, $150,000 of janitorial services, and $150,000 of salary paid to the director. To provide a reasonably accurate allocation of costs, the controller identified several possible cost drivers. These drivers and their association with each department follow. 

Required

a. Identify the appropriate cost objects.

b. Identify the appropriate cost driver for each indirect cost, and compute the allocation rate for assigning each indirect cost to the cost objects.

c. Determine the amount of telephone expense that should be allocated to each of the three departments.

d. Determine the amount of supplies expense that should be allocated to the physics department.

e. Determine the amount of office rent cost that should be allocated to the chemistry department.

f. Determine the amount of janitorial services cost that should be allocated to the biology department.

g. Identify two cost drivers not listed here that could be used to allocate the cost of the director’s salary to the three departments. 

Cost Driver Biology Chemistry 14 10 8,000 1 Physics Number of telephones Number of researchers Square footage of office space Number of secretaries 16 12 12,000 1 10 8. 8,000