Problem $(10$ points$).$

Quintano Corporation has two service departments Administration and Human Resources that provide services to each other and to departments Advertising and Circulation. Quintano has decided to allocate the service department costs using the following allocation bases: Human Resources based on number of employees; Administration based on the dollar amount of assets employed. The total costs for the departments are as follows: Administration, $$400,000$; Human Resources, $$275,000$; Advertising, $$490,000$; and Circulation, $$700,000.$

QUINTANO CORPORATION

DATA RELATING TO SERVICE DEPARTMENTS AND REVENUE DEPARTMENTS

Usage of Service Department Costs

Service Departments. Revenue Departments

Allocation Base. Administration. Human Resources. Advertising. Circulation

Number of employees. $5.4610$

Assets employed $$200,000$ $$50,000$ $$400,000.$ $$950,000$

REQUIRED: Using the attached forms, allocate the service department costs for the service departments Administration and Human Resources using the following methods.

Round all calculations for percentages or allocation rates to six decimal places and all dollar calculations to the nearest whole dollar.

Direct method

$(2)$

Step method, allocating the costs in order of services provided to other service departments from greatest to least.

$(3)$

Reciprocal $($simultaneous solution$)$ method.

QUINTANO CORPORATION

ALLOCATION OF SERVICE DEPARTMENT COSTS

DIRECT METHOD

Administration Human Resources Advertising Circulation

Direct Costs of Department $400,000.275,000.490,000.700,000$

Allocate Administration. $(400,000)150,000.250,000$

Allocate Human Resources $(275,000)103,125171,875$

Totals

Calculation of Allocation Rates:

Total Costs to Allocate $400000275,000$

Total Allocation Base

Allocation$$Rate

QUINANO CORPORATION

ALLOCATION OF SERVICE DEPARTMENT COSTS

STEP METHOD

Advertising. Circulation

Direct Costs of Department $ $490,000$ $ $700,000$

Allocation of

Remainder

Totals

Determination of Order of Allocation $($Based on Percentage of Services Provided to Other Service Departments$)$

Administration

Human Resources

QUINTANO CORPORATION

ALLOCATION OF SERVICE DEPARTMENT COSTS

STEP METHOD

Calculation of Allocation Rates:

Total Costs to Allocate

Divided By Allocation Base

Allocation Rate

QUINTANO CORPORATION

CALCULATION OF SERVICE DEPARTMENTS AMOUNTS TO BE

ALLOCATED USING RECIPROCAL METHOD

Let A $=$ Administration costs. Let H $=$ Human Resource costs

A$=$

H$=$

QUINTANOS CORPORATION

SERVICE DEPARTMENT COST ALLOCATION

RECIPROCAL METHOD

Administration Human Resources Advertising Circulation

Direct Costs of Department $400,000.275,000.490,000.700,000$

Allocate Administration.

Allocate Human Resources

Totals

Calculation of Allocation Rates:

Total Costs to Allocate

Total Allocation Base

Allocation$$Rate