Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating departments:
Question:
Western Services has three service departments: Information Systems (IS), Personnel, and Administration. There are two operating departments: Residential and Commercial. A summary of costs and other data for each department prior to the allocation of service department costs for the latest period follows:
IS Personnel Administration Residential Commercial
Number of IS service tickets 90 120 75 1,410 940
Number of employees 35 40 27 138 162
Square footage occupied 3,900 8,000 3,800 16,100 69,500
The costs of the service departments and the allocation basis for each department follow.
Department Direct Cost Allocation Base
Information Systems (IS) $ 17,000 IS service tickets
Personnel 24,000 Employees
Administration 20,700 Square footage occupied
Required:
- Assume that the company allocates service department costs to production departments using the direct method. What amount of Information Systems (IS) Department costs will be allocated to the Commercial Department?
- Assume the same method of allocation as in requirement (a). What amount of Personnel Department costs is allocated to the Residential Department?
- Assuming that the company allocates service department costs to other departments using the step method (starting with Administration and then IS), what amount of Administration Department costs is allocated to the IS Department?
- Assume the same method of allocation as in requirement (c). What amount of IS Department costs is allocated to the Administration?