Harry Dishman owns and operates Harry\'s Septic Service and Legal Advice. Harry\
ID: 2445908 • Letter: H
Question
Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:
Expected costs in the service departments for June are as follows:
Under the step method of allocation, how much Clerical service cost should be allocated to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial costs and round all calculations to the nearest whole dollar.)
Harry Dishman owns and operates Harry's Septic Service and Legal Advice. Harry's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:
Explanation / Answer
Service Department
Clerical
Janitorial
Septic Service
Legal Advice
Total
Clerical
= 12/101
= 11.88%
= 57/101
= 56.44%
= 32/101
= 31.68%
100%
= 27/155
= 17.42%
= 101/155
= 65.16%
= 27/155
= 17.42%
100%
Janitorial
= 470/2,010
= 23.38%
= 630/2,010
= 31.34%
= 910/2,010
= 45.28%
100%
= 1,670/5,810
= 28.74%
= 1,870/5,810
= 32.19%
= 2,270/5,810
= 39.07%
100%
Service Department
Clerical
Janitorial
Septic Service
Legal Advice
Total
Clerical
= 12/101
= 11.88%
= 57/101
= 56.44%
= 32/101
= 31.68%
100%
= 27/155
= 17.42%
= 101/155
= 65.16%
= 27/155
= 17.42%
100%
Janitorial
0
= 31.34 / (31.34+45.28)
= 40.90%
= 45.28 / (31.34+45.28)
= 59.10%
100%
0
= 32.19 / (32.19+39.07)
= 45.17%
= 39.07 / (32.19+39.07)
= 54.83%
100%
Service Department
Total Cost
Clerical
Janitorial
Septic Service
Legal Advice
Clerical
12,700
=12700* 11.88%
= 1,509
=12,700* 56.44%
= 7,168
=12,700*
31.68%
= 4,023
9,100
=
9100*17.42%
= 1,585
=
9100*65.16%
= 5,930
=
9100*17.42%
= 1,585
Janitorial
4,900 + 1,509 = 6,409
0
0
= 6409*40.90%
= 2,621.30
= 6409*59.1%
= 3,787.7
1,500 + 1,585 = 3,085
0
0
= 3085*45.17% = 1,393.50
= 3085*54.83%
= 1,691.5
TOTAL COST
= 12700 + 4900
= 17,600
= 7168+2621.30
= 9,789.30
=
4023 + 3787.7
= 7,810.70
= 9100 + 1500
= 10,600
= 5930+1393.50
= 7323.50
= 1585 + 1691.5
= 3,726.5
Total Clerical Service cost allocated to Septic Service operation -
Variable Cost = 7,168+ (1,509*40.90%)
= 7,168 + 617.18
= $ 7,785.18
Fixed Cost = 5,930 + (1,585*45.17%)
= 5,930 + 716
= $ 6,646
Service Department
Clerical
Janitorial
Septic Service
Legal Advice
Total
Clerical
- Variable Cost (based on expected no. of WOs – leaving Clerical WOs)
= 12/101
= 11.88%
= 57/101
= 56.44%
= 32/101
= 31.68%
100%
- Fixed Cost (based on avg no. of WOs)
= 27/155
= 17.42%
= 101/155
= 65.16%
= 27/155
= 17.42%
100%
Janitorial
- Variable Cost (based on labor hours – leaving Janitorial labor hours)
= 470/2,010
= 23.38%
= 630/2,010
= 31.34%
= 910/2,010
= 45.28%
100%
- Fixed Cost (based on square footage of space)
= 1,670/5,810
= 28.74%
= 1,870/5,810
= 32.19%
= 2,270/5,810
= 39.07%
100%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.