Not-A-Mega Bank has three service departments (Administration, Communications, a

Question

Not-A-Mega Bank has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows: The costs of the service departments are allocated on the following bases: Administration, employee hours; Communications, number of employees; and Facilities, square footage occupied. (Do not round your intermediate calculations. Round your answer to the nearest dollar amount.) Assume that Not-A-Mega Bank elects to distribute service department costs directly to production departments using the direct methed. What amount of Communications Department costs is allocated to the Deposits Department? Assume the same methed of allocation as in part (a). What amount of Administration Department costs is allocated to the Loans Department? Assuming that Not-A-Mega Bank elects to distribute sen/ice department costs to other departments using the step methed (starting with Facilities and then Communications), what amount of Facilities Department costs is allocated to the Communications Department?

Explanation / Answer

Solution:

(c) Facilities department cost allocated to Communications department is

10,100/(3,900 + 10,100 + 182,000 + 148,000) x $409,400

10,100/344,000 x $409,400

$12,020.17

$12,020

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