Accounting Appendix N 4 Pediatrics Geriatrics And Surgery The Clinic Allocates

56

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

Service Departments

Medicine

Departmental costs

$

563,940

$

82,310

Allocation:

104/291, 160/291)

IT (85/172, 87/172)

allocation

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.

Departmental costs

$

161,710

$

Allocation:

5,000/37,000)

Total costs after allocation

$

241,390

$

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

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.

Operating Department

Departmental costs

$

258,880

$

320,280

Allocation:

17/46)

Facilities costs (30/38, 8/38)

Total costs after allocation

$

314,340

$

341,000

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

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.

Technology

Departmental costs

$

31,356

$

566,960

$

688,220

Allocation:

(44/90, 46/90)

(34,650)

Personnel (75/117, 42/117)

(31,356)

Total costs after allocation

$

0

$

0

$

604,000

$

717,186

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.

Information

Departmental costs

$

226,170

Allocation:

Information Technology

(51/81, 30/81)

Administration (70/96,

26/96)

(21,696)

Total costs after

allocation

$

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

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.

Departmental costs

55,640

$

399,350

Allocation:

19,000/45,000)

2,000/32,000)

Total costs after allocation

$

415,790

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.

Facilities

Finishing

Departmental costs

$

137,520

$

900,750

Allocation:

16,000/42,000)

9,000/43,000)

Total costs after allocation

$

0

$

205,850

$

923,810

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

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.

Operating Department

Departmental costs

$

570,720

$

369,880

Allocation:

131/213, 79/213)

IT costs (45/87, 42/87)

Total costs after allocation

$

0

$

595,086

$

388,468

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

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.

Departmental costs

$

597,700

$

396,240

Allocation:

142/230, 83/230)

IT costs (65/111, 46/111)

Total costs after allocation

$

0

$

615,361

$

407,724