Problem - Support Dept Cost Allocation
Wolfram & Hart has two support departments, Human Resources and Information Tech, and two production departments, Litigations and Protection. Human Resources uses number of employees as an allocation base and Information Tech uses Service hours. All costs are regarded as strictly variable. For September, the following is available:
	Support Department			Production Departments
	Human Resources	Information Tech		Litigations	Protection
Direct Costs	$ 66,000	$ 45,000		$ 25,000	$ 15,000
Actual Activity:
Employees		3		6	3
Service Hours	315			1,848	462
1. If the company uses the direct method for allocating support department costs to revenue departments, what is the total cost allocated to Litigations? What is the total cost allocated to Protection?
2. Assume the company uses the step method for allocating support department costs to revenue departments. The company begins with allocating the Human Resources Department cost first. What is the total cost allocated to Litigations? What is the total cost allocated to Protection?
3. Assume the company uses the algebraic (reciprocal) method for allocating support department costs to revenue departments. What are the equations that will determine the total cost of the support departments?