Problem #8 (25 points) Western College has two service departments, Campus Safet

Question

Problem #8 (25 points) Western College has two service departments, Campus Safety and Technology Services that assist the Business School and the Law School. Budgeted costs of the Campus Safety and Technology Services are $900,000 and $1,900,000, respectively. Usage of the service departments' output during the year is anticipated to be: Provider of Service User of Services Campus Safety Technology Services 1 5% Campus Safety Technology Services Business School Law School 25% 75% 60% 25% Required: A. Use the direct method to allocate the costs of the Campus Safety and Technology Services to the Business School and the Law School.

Explanation / Answer

a) Allocation of cost : Direct method :

Allocation of cost under step method :

Business school Law school Total Campus safety 900000*25%=225000 900000*75%=675000 900000 Technology Services 1900000*60/85=1341176 558824 1900000 Total 1566176 1233824 2800000

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