(Step method) Rodderick Properties classifies its operations into three depart¬ ments: commercial sales, residential sales, and property management. The owner, Sandy Rodderick, wants to know the full cost of operating each de¬ partment. Direct departmental costs and several allocation bases associated with each follow:

The service departments are shown in a benefits-provided ranking. Rodder¬ ick has selected the following allocation bases for each department: number of employees/salespersons for administration, dollars of assets employed for accounting, and dollars of revenue for promotion.

a. Use the step method to allocate the service department costs to the revenue-generating departments.

b. Which department is apparently the most profitable? LO.1

AVAILABLE ALLOCATION BASES Dollars Direct Costs Number of Employees/ of Assets Salespersons Employed Dollars of Revenue Administration Accounting $ 750,000 10 $1,240,000 n/a 495,000 5 682,000 n/a Promotion 360,000 6 360,000 n/a Commercial sales 5,245,000 21 500,000 $4,500,000 Residential sales 4,589,510 101 725,000 9,500,000 Property management 199,200 13 175,000 500,000