Interdepartment Services: Step Method O\'Brian\'s Department Stores allocates th
ID: 2478943 • Letter: I
Question
Interdepartment Services: Step Method
O'Brian's Department Stores allocates the costs of the Personnel and Payroll departments to three retail sales departments, Housewares, Clothing, and Furniture. In addition to providing services to the operating departments, Personnel and Payroll provide services to each other. O'Brian's allocates Personnel Department costs on the basis of the number of employees and Payroll Department costs on the basis of gross payroll. Cost and allocation information for June is as follows:
%
(c) Prepare a schedule showing Personnel Department and Payroll Department cost allocations to the operating departments, assuming O'Brian's uses the step method.
For each department below, enter the total costs calculated from your schedule.
Do not round until your final answers. Round answers to the nearest dollar.
Personel Payroll Housewares Clothing Furniture Direct department cost $6,500 $3,300 $11,900 $20,000 $16,350 Number of employees 5 3 9 15 3 Gross payroll $6,400 $3,400 $11,400 $17,800 $8,000Explanation / Answer
Step method
Allocation sequence
Personnel
Payroll
Allocation base
No of employees
Payroll gross
Total base for other service producing department(a)
30
43,600
Total base for other service departments (b)
3
6,400
Percentage(b)/(a)
10%
14.7%
Second
first
Step Allocation
total
Personnel
houseware
Clothing
Furniture
Payroll
43,600
6,400
11,400
17,800
8,000
Percentage
100%
14.7%
26.1%
40.8%
18.4%
Cost allocated
3,300
485
861
1,346
608
Personnel
total
Houseware
Clothing
furniture
Allocation base
27
9
15
3
percentage
100%
33.3%
55.6%
11.1%
Cost allocation
6985
2,326
3,884
775
Cost allocation summary
personnel
Payroll
houseware
Clothing
Furniture
Department cost before
6,500
3,300
11,900
20,000
16,350
Cost allocated
payroll
485
(3,300)
861
1,346
608
Personnel
(6985)
---
2,326
3,884
775
Cost after allocation
-
-
15,087
25,230
17,733
Personnel
Payroll
Allocation base
No of employees
Payroll gross
Total base for other service producing department(a)
30
43,600
Total base for other service departments (b)
3
6,400
Percentage(b)/(a)
10%
14.7%
Second
first
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