Service Department Cost Allocation The costs of the HR department are allocated
ID: 2423532 • Letter: S
Question
Service Department Cost Allocation
The costs of the HR department are allocated on the basis of the number of employees in each department, whereas the costs of the accounting department are allocated on the basis of the number of financial transactions processed in each department.
In completing the requirements below, if an amount requires no entry, enter zero (“0”); Use the minus sign to indicate any negative values or deductions; for interim allocation rates, round to 4 decimal places if using a percentage (66.6667%) or 6 decimal places (.666667) if using a decimal in your computations. Use your rounded answer for subsequent calculations. Round your final answers to nearest dollar.
Required:
A. Assuming that Kenan Mortgage Company allocates service department costs by the direct method, how much overhead would be allocated from each service department to each producing department?
B. Assuming that Kenan Mortgage Company allocates service department costs by the step-down method, starting with the HR Department, how much overhead would be allocated from each service department to each producing department?
Service Departments Production Departments HR Accounting Commercial Lending Consumer Lending Department costs before allocation $ $ $ $ Allocation: HR $ $ $ $ Allocation: Accounting $ $ $ $ Departmental costs after allocation $ $ $ $Explanation / Answer
Service Departments
Production Departments
HR
Accounting
Commercial Lending
Consumer Lending
Department Costs before Allocation
$300000
$240000
$800000
$600000
Allocation HR
-$300000
$0
$190000
$110000
Allocation Accounting
-$240000
$90000
$150000
Departmental Cost after Allocation
$0
$0
$1080000
$860000
Service Departments
Production Departments
HR
Accounting
Commercial Lending
Consumer Lending
Department Costs before Allocation
$300000
$240000
$800000
$600000
Allocation HR
-$300000
$27273
$172727
$100000
Allocation Accounting
-$267273
$100227
$167047
Difference Due to Rounding
-$4
$3
Departmental Cost after Allocation
$1072950
$867050
Service Departments
Production Departments
HR
Accounting
Commercial Lending
Consumer Lending
Department Costs before Allocation
$300000
$240000
$800000
$600000
Allocation HR
-$300000
$0
$190000
$110000
Allocation Accounting
-$240000
$90000
$150000
Departmental Cost after Allocation
$0
$0
$1080000
$860000
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