ABC Corp. allocates the Human Resources and Payroll department costs to the sales departments of Luggage and Purses. Human Resources and Payroll also provide services to each other. Human resources costs are allocated by number of employees and payroll costs are allocated by number of working hours. Department costs, along with the number of employees that worked during May and their logged hours are provided below.

August Data Human resources Payroll Luggage Purses

Budgeted costs $13,900 $7,327 $14,400 $40,000

Actual costs 14,100 7,031 22,300 32,500

Working hours 3,600 1,500 5,400 9,000

Number of employees 5 3 9 18

Required:

Allocate the costs of the service departments to the operating department. The resulting schedules will include the total cost of operating the Luggage and Purse departments for May using the appropriate figures.

Apply this process using the following methods:

a. allocate service department costs using the direct method.

b. Allocate service department costs using the reciprocal method

Answer rating: 100% (QA)

To allocate the service department costs to the operating departments a Direct Method ... View the full answer