Interdepartment Services: Step Method O\'Brian\'s Department Stores allocates th

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:

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(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 $8,000

Explanation / Answer

Answer to a & b is given as per following table.

(C) Schedule fo Cost Allocation.

Department Personal Payroll Allocation Base No. of employees Gross Payroll ($) a Total Base (Excluding self self) 30 43,600 b Base for other service department 3 6,400 c % of service provided to other Service department (a/b) x 100 10% 14.68% d Sequence of allocation 2 1

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