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49) Muckenfuss Clinic uses the step-down method to allocate service department costs to
operating departments. The clinic has two service departments, Personnel and Information
Technology (IT), and two operating departments, Family Medicine and Geriatric Medicine. Data
concerning those departments follow:
Service Department
Operating Department
Personnel
IT
Family
Medicine
Geriatric
Medicine
Departmental costs
$
66,930
$
11,678
$
563,940
$
82,310
Employees
11
27
104
160
PCs
11
27
85
87
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on
the basis of PCs.
The total Geriatric Medicine Department cost after allocations is closest to:
A) $122,608
B) $128,781
C) $128,158
D) $91,358
50) Sandven Corporation uses the direct method to allocate its two service department costs to its
two operating departments. Data concerning those departments follow:
Service
Department A
Service
Department B
Operating
Department X
Operating
Department Y
Departmental costs
$
34,300
$
66,230
$
161,710
$
503,220
Allocation base A
5,000
1,000
32,000
17,000
Allocation base B
8,000
2,000
32,000
5,000
Service Department A costs are allocated on the basis of allocation base A and Service
Department B costs are allocated on the basis of allocation base B.
Required:
Allocate the service department costs to the operating departments using the direct method.
51) Cerce Corporation uses the direct method to allocate service department costs to operating
departments. The company has two service departments, Administrative and Facilities, and two
operating departments, Assembly and Finishing.
Service Department
Operating Department
Administrative
Facilities
Assembly
Finishing
Departmental costs
$29,440
$46,740
$258,880
$320,280
Employee hours
5,000
2,000
29,000
17,000
Space occupied--square feet
2,000
2,000
30,000
8,000
Administrative Department costs are allocated on the basis of employee hours and Facilities
Department costs are allocated on the basis of space occupied.
Required:
Allocate the service department costs to the operating departments using the direct method.
52) The direct method is used by Kurpinski Clinic to allocate its service department costs to its
operating departments. Data concerning those departments follow:
Service Departments
Operating
Departments
Information
Technology
Personnel
Pediatrics
Prenatal
Departmental costs
$34,650
$31,356
$566,960
$688,220
Computers
22
17
44
46
Employees
15
15
75
42
Information Technology costs are allocated on the basis of computers and Personnel costs are
allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.
53) Catoire Consultancy uses the direct method to allocate its service department costs to its
operating departments. The company has two service departments, Information Technology and
Administration, and two operating departments, Corporate Practice and Government Practice.
Data concerning those departments follow:
Service Departments
Operating Departments
Information
Technology
Administration
Corporate
Practice
Government
Practice
Departmental
costs
$26,244
$21,696
$226,170
$477,980
Computers
39
14
51
30
Employees
32
10
70
26
Information Technology Department costs are allocated on the basis of computers and
Administration Department costs are allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.
54) Alpha Manufacturing Corporation has two service departments, Custodial Services and
Maintenance, and three production departments, Cutting, Milling, and Assembly. The company
allocates the cost of Custodial Services on the basis of square footage and Maintenance on the
basis of labor-hours. No distinction is made between variable and fixed costs. Budgeted
operating data for the year just completed follow:
Service Departments Operating Departments
Custodial Maintenance Cutting Milling Assembly
Budgeted
costs before
allocation
$24,000
$12,000
$120,000
$75,000
$135,000
Square feet
2,000
20,000
10,000
44,000
26,000
Labor-hours
4,000
8,000
8,000
Required:
a. Prepare a schedule to allocate service department costs to the production departments by the
direct method.
b. Prepare a schedule to allocate service department costs to the production departments by the
step-down method, allocating Custodial Services first.
55) City Medical Clinic has two service departments, Building Services and Energy, and three
operating departments, Pediatrics, Geriatrics, and Surgery. The clinic allocates the cost of
Building Services on the basis of square footage and Energy on the basis of patient days. No
distinction is made between variable and fixed costs. Budgeted operating data for the year just
completed follow:
Service Departments
Operating Departments
Building
Services
Energy
Pediatrics
Geriatrics
Surgery
Budgeted costs before
allocation
$30,000
$15,000
$135,000
$90,000
$150,000
Square feet
2,000
8,000
12,000
36,000
24,000
Patient days
2,750
3,850
4,400
Required:
a. Prepare a schedule to allocate service department costs to operating departments by the direct
method (round all dollar amounts to the nearest whole dollar).
b. Prepare a schedule to allocate service department costs to operating departments by the step-
down method, allocating Building Services first (round all amounts to the nearest whole dollar).
56) Vitro Corporation has two service departments, Service Department A and Service
Department B, and two operating departments, Operating Department X and Operating
Department Y.
Service
Department A
Service
Department B
Operating
Department X
Operating
Department Y
Departmental costs
$
31,280
$
55,640
$
161,490
$
399,350
Allocation base A
4,000
1,000
26,000
19,000
Allocation base B
6,000
2,000
30,000
2,000
The company uses the step-down method to allocate service department costs to operating
departments. Service Department A costs are allocated first on the basis of allocation base A and
Service Department B costs are allocated second on the basis of allocation base B.
Required:
Allocate the service department costs to the operating departments using the step-down method.
57) Coakley Corporation uses the step-down method to allocate service department costs to
operating departments. The company has two service departments, Administration and Facilities,
and two operating departments, Assembly and Finishing.
Service Department
Operating Department
Administration
Facilities
Assembly
Finishing
Departmental costs
$22,260
$69,130
$137,520
$900,750
Employee time (hours)
4,000
1,000
25,000
16,000
Space occupied (square feet)
6,000
1,000
39,000
9,000
Administration Department costs are allocated first on the basis of employee time and Facilities
Department costs are allocated second on the basis of space occupied.
Required:
Allocate the service department costs to the operating departments using the step-down method.
58) Vercher Natal Clinic uses the step-down method to allocate service department costs to
operating departments. The clinic has two service departments, Administration and Information
Technology (IT), and two operating departments, Prenatal Care and Postnatal Care.
Service Department
Operating Department
Administration
IT
Prenatal Care
Postnatal Care
Departmental costs
$20,448
$22,506
$570,720
$369,880
Employees
2
3
131
79
Computers
2
2
45
42
Administration Department costs are allocated first on the basis of employees and IT Department
costs are allocated second on the basis of computers.
Required:
Allocate the service department costs to the operating departments using the step-down method.
59) Spivey Corporation has two service departments and two operating departments. Budgeted
costs and budgeted activity in the various departments for the current year are shown below:
Service Departments
Operating Departments
A
B
1
2
Departmental costs
$126,000
$70,000
$300,000
$500,000
Square feet occupied
1,000
2,000
8,000
10,000
Number of employees
20
30
150
200
Machine hours
40,000
60,000
The company uses the step-down method to allocate service department costs to operating
departments. The costs of Service Department A are allocated first on the basis of square feet of
space occupied. The costs of Service Department B are then allocated on the basis of number of
employees in other departments. Predetermined overhead rates in the operating departments are
based on machine hours.
Required:
a. Prepare a schedule showing the allocation of service department costs to other departments.
b. Compute the predetermined overhead rate for each operating department.
60) Georgeson Emergency Care Hospital uses the step-down method to allocate service
department costs to operating departments. The hospital has two service departments,
Administration and Information Technology (IT), and two operating departments, Emergency
Room and Intensive Care.
Service Department
Operating Department
Administration
IT
Emergency Room
Intensive Care
Departmental costs
$13,340
$15,805
$597,700
$396,240
Employees
4
5
142
83
Computers
4
4
65
46
Administration Department costs are allocated first on the basis of employees and IT Department
costs are allocated second on the basis of computers.
Required:
Allocate the service department costs to the operating departments using the step-down method.
