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:

(a) Determine the percentage of total Personnel Department services that was provided to the Payroll Department. (Round your answer to one decimal place.)

(b) Determine the percentage of total Payroll Department services that was provided to the Personnel Department. (Round your answer to one decimal place.)

(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.

Personnel Payroll Housewares Clothing Furniture Direct department cost 7,300 3,800 12,300 20,000 15,650 Number of employees 5 2 8 14 3 Gross payroll 6,100 2,800 10,800 17,200 8,500

Explanation / Answer

(a) 7%

Working:

(b) 14%

Working:

(c)

Personnel Payroll Housewares Clothing Furniture Number of employees 5 2 8 14 3 % of service provided 7% 30% 52% 11%

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