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Student name:__________
1) 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 $ 29,240 $ 40,106 $ 126,050 $ 417,840
Employee hours 5,000 1,100 40,000 28,000
Space occupied–square feet 9,800 1,100 40,000
4,000
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.
2) 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 Production Departments
Custodial Services Maintenance Cutting
Milling Assembly
Budgeted costs before allocation $ 42,000 $ 30,000 $ 138,000
$ 93,000 $ 153,000
Square feet 20,000 38,000 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.
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3) 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).
4) 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 3,200
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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.
5) 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.
6) 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.
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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.
7) 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.
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8) 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.
9) 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 Production Departments
Custodial Services 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.
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10) 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 Operating Department
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.
11) 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
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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.
12) 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 Information Technology 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 Information
Technology 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.
13) 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 Departments Operating Department
Administration Information Technology Emergency Room
Intensive Care
Departmental costs $13,340 $15,805 $597,700 $396,240
Employees 4 5 142 83
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Computers 4 4 65 46
Administration Department costs are allocated first on the basis of employees and Information
Technology 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.
14) Under the __________ method of allocating service department costs, services provided
by service departments to other service departments are ignored and all service department costs
are allocated directly to the operating departments.
A) step-down
B) weighted-average
C) direct
D) FIFO
15) The step-down method of allocating service department costs:
A) is a less accurate method of allocation than the direct method.
B) can’t be used when a company has more than two service departments.
C) is a simpler allocation method than the direct method.
D) ignores some interdepartmental services.
16) Behrend Clinic uses the direct method to allocate service department costs to operating
departments. The clinic has two service departments, Personnel and Support, and two operating
departments, Prenatal and Pediatrics.
Service Departments Operating Department
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Personnel Support Prenatal Pediatrics
Departmental costs $ 19,316 $ 42,500 $ 109,760 $ 298,900
Employee hours 5,000 1,000 30,000 14,000
Space occupied 3,000 2,000 45,000 6,000
Personnel Department costs are allocated on the basis of employee hours and Support
Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics
Department cost after the allocations of service department costs is closest to:
A) $310,514
B) $308,241
C) $303,900
D) $310,046
17) Behrend Clinic uses the direct method to allocate service department costs to operating
departments. The clinic has two service departments, Personnel and Support, and two operating
departments, Prenatal and Pediatrics.
Service Department Operating Department
Personnel Support Prenatal Pediatrics
Departmental costs $ 29,200 $ 55,040 $ 242,050 $ 423,200
Employee hours 5,000 1,000 26,000 14,000
Space occupied 3,000 2,000 35,000 8,000
Personnel Department costs are allocated on the basis of employee hours and Support
Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics
Department cost after the allocations of service department costs is closest to:
A) $441,260
B) $443,660
C) $433,440
D) $444,471
18) Kolinski Surgical Hospital uses the direct method to allocate service department costs to
operating departments. The hospital has two service departments, Telecommunications and
Administration, and two operating departments, Surgery and Recovery.
Service Departments Operating Department
Tele communications Administration Surgery Recovery
Departmental costs $ 26,344 $ 27,472 $ 282,750 $ 599,690
Telecommunications ports 31 14 40 34
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Employees 30 11 74 27
Telecommunications Department costs are allocated on the basis of the number of
telecommunications ports in departments and Administration Department costs are allocated on
the basis of employees. The total Surgery Department cost after service department allocations is
closest to:
A) $317,118
B) $314,853
C) $310,244
D) $305,921
19) Koehl 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 Wholesaling.
Service Departments Operating Department
Administrative Facilities Assembly Wholesaling
Departmental costs $ 19,440 $ 71,340 $ 185,580 $ 392,950
Employee hours 4,000 2,000 22,000 14,000
Space occupied 2,000 1,000 39,000 2,000
Administrative costs are allocated on the basis of employee hours and Facilities costs are
allocated on the basis of space occupied. The total Wholesaling Department cost after the
allocations of service department costs is closest to:
A) $403,990
B) $396,430
C) $403,642
D) $402,601
20) Parker Corporation has two service departments, Cafeteria and Engineering, and two
operating departments. The number of employees in each department is given below:
Cafeteria 10
Engineering 40
Operating Department 1 500
Operating Department 2 200
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The costs of the Cafeteria are allocated to other departments on the basis of the number of
employees in the departments. If these costs are budgeted at $69,375, the amount of Cafeteria
cost allocated to Engineering under the direct method would be closest to:
A) $0
B) $3,700
C) $3,750
D) $17,344
21) Stoltz Corporation uses the direct method to allocate service department costs to
operating departments. The company has two service departments, Data Processing and
Personnel, and two operating departments, Assembly and Finishing.
Service Department Operating Department
Data Processing Personnel Assembly Finishing
Departmental costs $ 44,955 $ 28,290 $ 313,500 $ 676,630
Computer workstations 43 25 58 53
Employees 37 20 65 50
Data Processing Department costs are allocated on the basis of computer workstations and
Personnel Department costs are allocated on the basis of employees. The total amount of Data
Processing Department cost allocated to the two operating departments is closest to:
A) $44,955
B) $23,490
C) $15,990
D) $21,465
22) Stoltz Corporation uses the direct method to allocate service department costs to
operating departments. The company has two service departments, Data Processing and
Personnel, and two operating departments, Assembly and Finishing.
Service Department Operating Department
Data Processing Personnel Assembly Finishing
Departmental costs $ 26,488 $ 18,630 $ 188,980 $ 506,960
Computer workstations 37 12 45 41
Employees 35 11 46 35
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Data Processing Department costs are allocated on the basis of computer workstations and
Personnel Department costs are allocated on the basis of employees. The total amount of Data
Processing Department cost allocated to the two operating departments is closest to:
A) $23,245
B) $26,488
C) $61,567
D) $16,874
23) The direct method is used by Marrero Publishing, Incorporated, to allocate service
department costs to operating departments. The company has two service departments,
Information Technology and Personnel, and two operating departments, Prepress and Printing.
Service Department Operating Department
Information Technology Personnel Prepress Printing
Departmental costs $ 27,412 $ 27,008 $ 376,940 $ 530,110
Computer workstations 28 19 51 38
Employees 27 14 98 30
Information Technology Department costs are allocated on the basis of computer workstations
and Personnel Department costs are allocated on the basis of employees. The total Prepress
Department cost after service department allocations is closest to:
A) $406,961
B) $413,326
C) $402,881
D) $410,563
24) Reddicks 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 Pediatrics. Data
concerning those departments follow:
Service Departments Operating Department
Personnel Information Technology Family Medicine Pediatrics
Departmental costs $ 86,184 $ 45,995 $ 608,130 $ 316,290
Employees 18 26 128 188
Personnel costs 19 26 125 156
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Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs. The total Pediatrics Department cost after
allocations is closest to:
A) $345,462
B) $393,099
C) $392,838
D) $383,307
25) Rondo Children’s Clinic allocates service department costs to operating departments
using the step-down method. The clinic has two service departments, Administration and
Information Technology (IT), and two operating departments, Prenatal and Pediatric. Data
concerning those departments follow:
Service Department Operating Department
Administration Information Technology Prenatal Pediatric
Departmental costs $ 54,736 $ 37,449 $ 383,270 $ 259,590
Employees 15 21 118 172
Personnel costs 15 21 102 109
Administration costs are allocated first on the basis of employees and Information Technology
costs are allocated second on the basis of Personnel costs. The total Pediatric Department cost
after allocations is closest to:
A) $311,117
B) $280,845
C) $304,995
D) $311,400
26) Cervetti, Incorporated, allocates service department costs to operating departments using
the step-down method. The company has two service departments, Administration and Physical
Plant, and two operating departments, Assembly and Testing. Data concerning those departments
follow:
Service Department Operating Department
Administration Physical Plant Assembly Testing
Departmental costs $ 26,220 $ 78,860 $ 127,160 $ 737,860
Employee time 4,000 1,000 25,000 12,000
Space occupied 9,000 1,000 37,000 6,000
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Administration Department costs are allocated first on the basis of employee time and Physical
Plant Department costs are allocated second on the basis of space occupied. The total Testing
Department cost after allocations is closest to:
A) $754,279
B) $757,240
C) $748,960
D) $757,368
27) Casas Corporation has two service departments, Personnel and Cafeteria, and two
operating departments, Customer Care and Customer Solutions. The number of employees in
each department are:
Personnel 25
Cafeteria 50
Customer Care 245
Customer Solutions 285
Total 605
The fixed costs of the Personnel Department are allocated on the basis of the number of
employees. If these costs are budgeted at $46,110, the amount of Personnel Department cost
allocated to the Cafeteria under the step-down method would be closest to:
A) $0
B) $3,975.00
C) $3,810.74
D) $3,807.08
28) Casas Corporation has two service departments, Personnel and Cafeteria, and two
operating departments, Customer Care and Customer Solutions. The number of employees in
each department are:
Personnel 8
Cafeteria 7
Customer Care 32
Customer Solutions 11
Total 58
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The fixed costs of the Personnel Department are allocated on the basis of the number of
employees. If these costs are budgeted at $42,150, the amount of Personnel Department cost
allocated to the Cafeteria under the step-down method would be closest to:
A) $19,670
B) $5,901
C) $0
D) $5,087
29) Dainels Corporation uses the step-down method to allocate service department costs to
operating departments. The company has two service departments, General Management and
Physical Plant, and two operating departments, Sales and After-Sales. Data concerning those
departments follow:
Service Department Operating Department
General Management Physical Plant Sales After-Sales
Departmental costs $ 26,520 $ 49,070 $ 232,630 $ 290,500
Employee time 7,000 3,000 36,000 13,000
Space occupied 11,000 3,000 36,000 8,000
General Management Department costs are allocated first on the basis of employee time and
Physical Plant Department costs are allocated second on the basis of space occupied. The total
After-Sales Department cost after allocations is closest to:
A) $303,684
B) $306,330
C) $299,700
D) $306,466
30) Dainels Corporation uses the step-down method to allocate service department costs to
operating departments. The company has two service departments, General Management and
Physical Plant, and two operating departments, Sales and After-Sales. Data concerning those
departments follow:
Service Department Operating Department
General Management Physical Plant Sales After-Sales
Departmental costs $ 36,550 $ 70,300 $ 412,500 $ 492,780
Employee time 5,000 2,000 27,000 14,000
Space occupied 1,000 1,000 38,000 7,000
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General Management Department costs are allocated first on the basis of employee time and
Physical Plant Department costs are allocated second on the basis of space occupied. The total
After-Sales Department cost after allocations is closest to:
A) $516,196
B) $515,880
C) $503,980
D) $513,911
31) Ockey Corporation uses the direct method to allocate service department costs to
operating departments. The company has two service departments, Information Technology and
Personnel, and two operating departments, Fabrication and Customization.
Service Department Operating Department
Information Technology Personnel Fabrication Customization
Departmental costs $ 32,584 $ 30,406 $ 443,710 $ 680,080
Computer workstations 28 23 55 51
Employees 25 13 81 47
Information Technology Department costs are allocated on the basis of computer workstations
and Personnel Department costs are allocated on the basis of employees.
The total amount of Information Technology Department cost allocated to the two operating
departments is closest to:
A) $17,889
B) $32,584
C) $21,437
D) $119,790
32) Ockey Corporation uses the direct method to allocate service department costs to
operating departments. The company has two service departments, Information Technology and
Personnel, and two operating departments, Fabrication and Customization.
Service Department Operating Department
Information Technology Personnel Fabrication Customization
Departmental costs $ 26,880 $ 21,525 $ 251,210 $ 447,000
Computer workstations 37 18 43 37
Employees 34 13 73 32
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Information Technology Department costs are allocated on the basis of computer workstations
and Personnel Department costs are allocated on the basis of employees.
The total amount of Information Technology Department cost allocated to the two operating
departments is closest to:
A) $26,880
B) $15,929
C) $58,119
D) $21,943
33) Ockey Corporation uses the direct method to allocate service department costs to
operating departments. The company has two service departments, Information Technology and
Personnel, and two operating departments, Fabrication and Customization.
Service Department Operating Department
Information Technology Personnel Fabrication Customization
Departmental costs $ 26,880 $ 21,525 $ 251,210 $ 447,000
Computer workstations 37 18 43 37
Employees 34 13 73 32
Information Technology Department costs are allocated on the basis of computer workstations
and Personnel Department costs are allocated on the basis of employees.
The total Fabrication Department cost after service department allocations is closest to:
A) $270,110
B) $277,969
C) $280,623
D) $274,308
34) Romain Surgical Hospital uses the direct method to allocate service department costs to
operating departments. The hospital has two service departments, Information Technology and
Administration, and two operating departments, Surgery and Recovery.
Service Department Operating Department
Information Technology Administration Surgery Recovery
Departmental costs $ 25,956 $ 36,356 $ 563,640 $ 588,200
Computer workstations 20 17 54 30
Employees 15 13 95 27
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Information Technology Department costs are allocated on the basis of computer workstations
and Administration Department costs are allocated on the basis of employees.
The total amount of Information Technology Department cost allocated to the two operating
departments is closest to:
A) $18,019
B) $109,015
C) $21,587
D) $25,956
35) Romain Surgical Hospital uses the direct method to allocate service department costs to
operating departments. The hospital has two service departments, Information Technology and
Administration, and two operating departments, Surgery and Recovery.
Service Department Operating Department
Information Technology Administration Surgery Recovery
Departmental costs $ 33,912 $ 35,157 $ 503,570 $ 701,610
Computer workstations 28 25 59 49
Employees 24 10 90 45
Information Technology Department costs are allocated on the basis of computer workstations
and Administration Department costs are allocated on the basis of employees.
The total Surgery Department cost after service department allocations is closest to:
A) $545,534
B) $546,302
C) $538,727
D) $537,482
36) Romain Surgical Hospital uses the direct method to allocate service department costs to
operating departments. The hospital has two service departments, Information Technology and
Administration, and two operating departments, Surgery and Recovery.
Service Department Operating Department
Information Technology Administration Surgery Recovery
Departmental costs $ 25,956 $ 36,356 $ 563,640 $ 588,200
Computer workstations 20 17 54 30
Employees 15 13 95 27
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Information Technology Department costs are allocated on the basis of computer workstations
and Administration Department costs are allocated on the basis of employees.
The total Surgery Department cost after service department allocations is closest to:
A) $598,249
B) $608,636
C) $602,727
D) $605,827
37) Seidell Corporation has two service departments, Administrative and Facilities, and two
operating departments, Assembly and Customer Solutions.
Service Department Operating Department
Administrative Facilities Assembly Customer Solutions
Departmental costs $ 43,560 $ 54,720 $ 561,960 $ 253,030
Employee hours 4,000 2,000 27,000 17,000
Space occupied 1,000 2,000 37,000 1,000
The company uses the direct method to allocate service department costs to operating
departments. Administrative costs are allocated on the basis of employee hours and Facilities
costs are allocated on the basis of space occupied.
The total amount of Administrative Department cost allocated to the Assembly Department is
closest to:
A) $26,730
B) $25,568
C) $42,414
D) $23,522
38) Seidell Corporation has two service departments, Administrative and Facilities, and two
operating departments, Assembly and Customer Solutions.
Service Department Operating Department
Administration Facilities Assembly Customer Solutions
Departmental costs $ 43,560 $ 54,720 $ 561,960 $ 253,030
Employee hours 4,000 2,000 27,000 17,000
Space occupied 1,000 2,000 37,000 1,000
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The company uses the direct method to allocate service department costs to operating
departments. Administrative costs are allocated on the basis of employee hours and Facilities
costs are allocated on the basis of space occupied.
The total Customer Solutions Department cost after the allocations of service department costs
is closest to:
A) $269,175
B) $254,470
C) $270,593
D) $271,300
39) Maute Clinic has two service departments, Administrative and Support, and two
operating departments, Adult Medicine and Pediatrics.
Service Department Operating Department
Administration Support Adult Medicine Pediatrics
Departmental costs $ 23,600 $ 51,480 $ 259,690 $ 288,790
Employee hours 3,000 2,000 26,000 16,000
Space occupied 3,000 2,000 38,000 6,000
The clinic uses the direct method to allocate service department costs to operating departments.
Administrative Department costs are allocated on the basis of employee hours and Support
Department costs are allocated on the basis of space occupied in square feet.
The total amount of Administrative Department cost allocated to the Adult Medicine
Department is closest to:
A) $13,636
B) $14,610
C) $20,382
D) $15,340
40) Maute Clinic has two service departments, Administrative and Support, and two
operating departments, Adult Medicine and Pediatrics.
Service Department Operating Department
Administration Support Adult Medicine Pediatrics
Departmental costs $ 23,600 $ 51,480 $ 259,690 $ 288,790
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Employee hours 3,000 2,000 26,000 16,000
Space occupied 3,000 2,000 38,000 6,000
The clinic uses the direct method to allocate service department costs to operating departments.
Administrative Department costs are allocated on the basis of employee hours and Support
Department costs are allocated on the basis of space occupied in square feet.
The total Pediatrics Department cost after the allocations of service department costs is closest
to:
A) $302,436
B) $304,070
C) $304,136
D) $295,810
41) Prestwich Corporation has two service departments and two operating departments. Costs
of the Building and Grounds service department are allocated to other departments on the basis
of square feet of space occupied. The departments in the company and the amount of space
occupied by each are presented below:
Building and Grounds 2,000 square feet
Cafeteria 8,000 square feet
Operating Department A 20,000 square feet
Operating Department B 30,000 square feet
Budgeted costs in the Building and Grounds department total $34,800 for the year.
Assuming the step-down method is used and Building and Grounds costs are allocated first, the
amount of Building and Grounds costs allocated to the Cafeteria would be:
A) $0
B) $4,800
C) $4,640
D) $5,568
42) Prestwich Corporation has two service departments and two operating departments. Costs
of the Building and Grounds service department are allocated to other departments on the basis
of square feet of space occupied. The departments in the company and the amount of space
occupied by each are presented below:
Building and Grounds 2,000 square feet
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Cafeteria 8,000 square feet
Operating Department A 20,000 square feet
Operating Department B 30,000 square feet
Budgeted costs in the Building and Grounds department total $34,800 for the year.
The amount of Building and Grounds department cost allocated to Operating Department A
under the direct method would be:
A) $0
B) $11,600
C) $12,000
D) $13,920
43) The James Corporation has four departments with data as follows:
Service Departments Operating Department
Cafeteria Maintenance Milling Finishing
Budgeted costs $ 12,000 $ 10,000 $ 42,000 $ 38,000
Number of employees 12 10 84 66
Labor hours 1,500 1,250 5,250 4,750
Maintenance Department costs are allocated on the basis of labor hours. The amount of cost
allocated to Milling from Maintenance under the direct method would be:
A) $5,600
B) $6,720
C) $5,250
D) $5,700
44) The James Corporation has four departments with data as follows:
Service Departments Operating Department
Cafeteria Maintenance Milling Finishing
Budgeted costs $ 12,000 $ 10,000 $ 42,000 $ 38,000
Number of employees 12 10 84 66
Labor hours 1,500 1,250 5,250 4,750
Cafeteria costs are allocated on the basis of number of employees. If the step-down method is
used with costs of the Cafeteria allocated first, the amount of cost allocated from the Cafeteria to
Maintenance would be:
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A) $0
B) $625
C) $698
D) $750
45) Watts Corporation has a Custodial Services Department that services the company’s
Maintenance Department and its two operating departments. Costs of the Custodial Services
Department are allocated to other departments on the basis of square feet of space occupied. The
amount of space occupied by each department is given below:
Custodial Services 4,000 square feet
Maintenance 6,000 square feet
Operating Department 1 30,000 square feet
Operating Department 2 60,000 square feet
Budgeted costs in the Custodial Services Department total $43,200.
Suppose the company uses the step-down method of allocation and the costs of the Custodial
Services Department are allocated first. The amount of Custodial Services Department cost
allocated to the Maintenance Department would be:
A) $2,592
B) $2,700
C) $2,880
D) $0
46) Watts Corporation has a Custodial Services Department that services the company’s
Maintenance Department and its two operating departments. Costs of the Custodial Services
Department are allocated to other departments on the basis of square feet of space occupied. The
amount of space occupied by each department is given below:
Custodial Services 4,000 square feet
Maintenance 6,000 square feet
Operating Department 1 30,000 square feet
Operating Department 2 60,000 square feet
Budgeted costs in the Custodial Services Department total $43,200.
Suppose the company uses the direct method of allocation. The amount of Custodial Services
Department cost allocated to Operating Department 2 would be:
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A) $25,920
B) $27,000
C) $28,800
D) $21,600
47) Anchor Corporation has two service departments, Personnel and Engineering, and two
operating departments. The costs of the Personnel Department are allocated to other departments
on the basis of the number of employees in the departments. Departments and number of
employees are as follows:
Employees
Personnel Department 50
Engineering Department 70
Operating Department 1 700
Operating Department 2 300
Total employees 1,120
Costs in the Personnel Department total $1,070,000 per year.
Suppose the company uses the step-down method and Personnel Department costs are
allocated first. The amount of the Personnel Department cost allocated to the Engineering
Department would be closest to:
A) $66,875
B) $0
C) $70,000
D) $74,900
48) Anchor Corporation has two service departments, Personnel and Engineering, and two
operating departments. The costs of the Personnel Department are allocated to other departments
on the basis of the number of employees in the departments. Departments and number of
employees are as follows:
Employees
Personnel Department 10
Engineering Department 20
Operating Department 1 75
Operating Department 2 95
Total employees 200
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Costs in the Personnel Department total $168,283 per year.
Suppose the company uses the step-down method and Personnel Department costs are
allocated first. The amount of the Personnel Department cost allocated to the Engineering
Department would be closest to:
A) $16,828
B) $17,714
C) $0
D) $112,189
49) Anchor Corporation has two service departments, Personnel and Engineering, and two
operating departments. The costs of the Personnel Department are allocated to other departments
on the basis of the number of employees in the departments. Departments and number of
employees are as follows:
Employees
Personnel Department 10
Engineering Department 20
Operating Department 1 75
Operating Department 2 95
Total employees 200
Costs in the Personnel Department total $168,283 per year.
Suppose the company uses the direct method of allocation. The amount of Personnel
Department cost that would be allocated to Operating Department 2 would be closest to:
A) $0
B) $84,141.50
C) $79,934.43
D) $94,040.50
50) San Juan Minerals (SJM) has two service departments and two operating departments.
Operating data for these departments for last year are as follows:
Service Departments Operating Departments
Maintenance Cafeteria Mining Processing
Departmental costs $ 48,000 $ 45,000 $ 70,000 $ 130,000
Machine hours 2,000 1,000 11,000 9,000
Number of employees 40 30 400 360
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Costs of the Maintenance Department are allocated on the basis of machine hours. Cafeteria
costs are allocated on the basis of number of employees. San Juan Minerals does not distinguish
between variable and fixed overhead costs.
Assuming that San Juan Minerals allocates service department costs using the direct method,
the total cost allocated from Maintenance to Processing would be closest to:
A) $21,600
B) $18,783
C) $26,400
D) $20,571
51) San Juan Minerals (SJM) has two service departments and two operating departments.
Operating data for these departments for last year are as follows:
Service Departments Operating Departments
Maintenance Cafeteria Mining Processing
Departmental costs $ 48,000 $ 45,000 $ 70,000 $ 130,000
Machine hours 2,00 0 1,000 11,000 9,000
Number of employees 40 30 400 360
Costs of the Maintenance Department are allocated on the basis of machine hours. Cafeteria
costs are allocated on the basis of number of employees. SJM does not distinguish between
variable and fixed overhead costs.
Assuming that SJM allocates service department costs using the direct method, the total cost
allocated from Cafeteria to Mining would be closest to:
A) $21,687
B) $15,750
C) $23,684
D) $22,500
52) San Juan Minerals (SJM) has two service departments and two operating departments.
Operating data for these departments for last year are as follows:
Service Departments Operating Departments
Maintenance Cafeteria Mining Processing
Departmental costs $ 48,000 $ 45,000 $ 70,000 $ 130,000
Machine hours 2,000 1,000 11,000 9,000
Number of employees 40 30 400 360
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Costs of the Maintenance Department are allocated on the basis of machine hours. Cafeteria
costs are allocated on the basis of number of employees. San Juan Minerals does not distinguish
between variable and fixed overhead costs.
Assume that San Juan Minerals uses the step-down method to allocate service department
costs, starting with Maintenance. The total overhead allocated from Maintenance to Mining
would be closest to:
A) $25,143
B) $22,957
C) $51,150
D) $16,800
53) San Juan Minerals (SJM) has two service departments and two operating departments.
Operating data for these departments for last year are as follows:
Service Departments Operating Departments
Maintenance Cafeteria Mining Processing
Departmental costs $ 48,000 $ 45,000 $ 70,000 $ 130,000
Machine hours 2,000 1,000 11,000 9,000
Number of employees 40 30 400 360
Costs of the Maintenance Department are allocated on the basis of machine hours. Cafeteria
costs are allocated on the basis of number of employees. San Juan Minerals does not distinguish
between variable and fixed overhead costs.
Assume that San Juan Minerals uses the step-down method to allocate service department
costs, starting with Maintenance. The total overhead allocated from Cafeteria to Processing
would be closest to:
A) $21,316
B) $22,398
C) $21,279
D) $23,643
54) Strzelecki Corporation uses the step-down method to allocate service department costs to
operating departments. The company has two service departments, Service Department A and
Service Department B, and two operating departments, Operating Department X and Operating
Department Y. Data concerning those departments follow:
Service Departments Operating Departments
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Service Department A Service Department B Operating Department
X Operating Department Y
Departmental costs $ 37,800 $ 45,780 $ 247,360 $ 304,330
Allocation base A 5,000 1,000 29,000 15,000
Allocation base B 5,000 2,000 39,000 3,000
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.
In the first step of the allocation, the amount of Service Department A cost allocated to the
Operating Department X is closest to:
A) $24,360
B) $21,924
C) $16,948
D) $24,914
55) Strzelecki Corporation uses the step-down method to allocate service department costs to
operating departments. The company has two service departments, Service Department A and
Service Department B, and two operating departments, Operating Department X and Operating
Department Y. Data concerning those departments follow:
Service Departments Operating Departments
Service Department A Service Department B Operating Department
X Operating Department Y
Departmental costs $ 49,000 $ 45,000 $ 259,700 $ 304,100
Allocation base A 5,800 6,000 31,000 13,000
Allocation base B 4,700 2,300 40,000 8,000
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.
The total Operating Department Y cost after allocations is closest to:
A) $342,960
B) $316,840
C) $325,320
D) $312,580
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56) Strzelecki Corporation uses the step-down method to allocate service department costs to
operating departments. The company has two service departments, Service Department A and
Service Department B, and two operating departments, Operating Department X and Operating
Department Y. Data concerning those departments follow:
Service Departments Operating Departments
Service Department A Service Department B Operating Department
X Operating Department Y
Departmental costs $ 37,800 $ 45,780 $ 247,360 $ 304,330
Allocation base A 5,000 1,000 29,000 15,000
Allocation base B 5,000 2,000 39,000 3,000
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.
The total Operating Department Y cost after allocations is closest to:
A) $320,486
B) $318,473
C) $320,260
D) $307,660
57) The Thomas Corporation has two service departments and two operating departments.
The following data are available for a recent period:
Service Departments Operating Departments
Administration Custodial Assembly Finishing
Overhead costs $ 80,000 $ 60,000 $ 75,000 $ 92,000
Number of employees 30 60 360 180
Square feet occupied 18,000 25,000 60,000 90,000
Thomas allocates service department costs by the step-down method in the following order:
Administrative Department costs are allocated first, based on number of employees; Custodial
Department costs are allocated second, based on square feet occupied. No distinction is made
between fixed and variable costs.
After all allocations, the total amount of overhead cost contained in the Assembly Department
will be:
A) $152,333
B) $168,550
C) $150,200
D) $155,700
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58) The Thomas Corporation has two service departments and two operating departments.
The following data are available for a recent period:
Service Departments Operating Departments
Administration Custodial Assembly Finishing
Overhead costs $ 80,000 $ 60,000 $ 75,000 $ 92,000
Number of employees 30 60 360 180
Square feet occupied 18,000 25,000 60,000 90,000
Thomas allocates service department costs by the step-down method in the following order:
Administrative Department costs are allocated first, based on number of employees; Custodial
Department costs are allocated second, based on square feet occupied. No distinction is made
between fixed and variable costs.
After the allocations, the total amount of overhead cost contained in the Finishing Department
will be:
A) $156,800
B) $151,300
C) $154,667
D) $138,450
59) Yamane Corporation, a manufacturer, 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. Data
concerning those departments follow:
Service Departments Operating Departments
Administration Facilities Assembly Finishing
Departmental costs $ 21,000 $ 67,800 $ 103,770 $ 415,770
Labor hours 3,770 8,000 20,000 12,000
Space occupied 6,280 1,070 36,000 9,000
Administration Department costs are allocated first on the basis of labor hours and Facilities
Department costs are allocated second on the basis of space occupied.
In the first step of the allocation, the amount of Administration Department cost allocated to
the Assembly Department is closest to:
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A) $14,400
B) $14,700
C) $6,300
D) $10,500
60) Yamane Corporation, a manufacturer, 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. Data
concerning those departments follow:
Service Departments Operating Departments
Administration Facilities Assembly Finishing
Departmental costs $ 22,620 $ 67,440 $ 105,520 $ 427,780
Labor hours 3,000 2,000 21,000 16,000
Space occupied 7,000 1,000 32,000 3,000
Administration Department costs are allocated first on the basis of labor hours and Facilities
Department costs are allocated second on the basis of space occupied.
In the first step of the allocation, the amount of Administration Department cost allocated to
the Assembly Department is closest to:
A) $4,476
B) $12,838
C) $11,310
D) $12,180
61) Yamane Corporation, a manufacturer, 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. Data
concerning those departments follow:
Service Departments Operating Departments
Administration Facilities Assembly Finishing
Departmental costs $ 40,000 $ 67,900 $ 104,310 $ 401,980
Labor hours 3,690 6,000 26,000 18,000
Space occupied 6,410 1,170 36,000 9,000
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Administration Department costs are allocated first on the basis of labor hours and Facilities
Department costs are allocated second on the basis of space occupied.
The total Finishing Department cost after allocations is closest to:
A) $437,320
B) $416,520
C) $416,380
D) $430,920
62) Yamane Corporation, a manufacturer, 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. Data
concerning those departments follow:
Service Departments Operating Departments
Administration Facilities Assembly Finishing
Departmental costs $ 22,620 $ 67,440 $ 105,520 $ 427,780
Labor hours 3,000 2,000 21,000 16,000
Space occupied 7,000 1,000 32,000 3,000
Administration Department costs are allocated first on the basis of labor hours and Facilities
Department costs are allocated second on the basis of space occupied.
The total Finishing Department cost after allocations is closest to:
A) $443,342
B) $433,660
C) $441,102
D) $442,940
63) Blondell Legal Services, Limited Liability Company, uses the step-down method to
allocate service department costs to operating departments. The firm has two service
departments, Personnel and Information Technology (IT), and two operating departments,
Family Law and Corporate Law. Data concerning those departments follow:
Service Department Operating Department
Personnel Information Technology Family Law Corporate Law
Departmental costs $ 39,438 $ 44,982 $ 357,220 $ 360,540
Employees 11 25 116 172
Personnel costs 11 28 100 152
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Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
In the first step of the allocation, the amount of Personnel Department cost allocated to the
Family Law Department is closest to:
A) $18,881
B) $14,127
C) $15,611
D) $14,616
64) Blondell Legal Services, Limited Liability Company, uses the step-down method to
allocate service department costs to operating departments. The firm has two service
departments, Personnel and Information Technology (IT), and two operating departments,
Family Law and Corporate Law. Data concerning those departments follow:
Service Department Operating Department
Personnel Information Technology Family Law Corporate Law
Departmental costs $ 85,284 $ 29,703 $ 883,360 $ 189,010
Employees 11 25 121 163
Personnel costs 12 26 112 137
Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
In the first step of the allocation, the amount of Personnel Department cost allocated to the
Family Law Department is closest to:
A) $32,248
B) $70,252
C) $36,336
D) $33,396
65) Blondell Legal Services, Limited Liability Company, uses the step-down method to
allocate service department costs to operating departments. The firm has two service
departments, Personnel and Information Technology (IT), and two operating departments,
Family Law and Corporate Law. Data concerning those departments follow:
Service Department Operating Department
Personnel Information Technology Family Law Corporate Law
Departmental costs $ 39,750 $ 46,152 $ 357,180 $ 360,500
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Employees 14 24 116 178
Personnel costs 14 20 100 156
Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
The total Corporate Law Department cost after allocations is closest to:
A) $412,713
B) $412,702
C) $410,272
D) $394,770
66) Blondell Legal Services, Limited Liability Company, uses the step-down method to
allocate service department costs to operating departments. The firm has two service
departments, Personnel and Information Technology (IT), and two operating departments,
Family Law and Corporate Law. Data concerning those departments follow:
Service Department Operating Department
Personnel Information Technology Family Law Corporate Law
Departmental costs $ 85,284 $ 29,703 $ 883,360 $ 189,010
Employees 11 25 121 163
Personnel costs 12 26 112 137
Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
The total Corporate Law Department cost after allocations is closest to:
A) $254,137
B) $246,630
C) $254,301
D) $209,149
67) 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 Information Technology Family
Medicine Geriatric Medicine
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Departmental costs $ 38,478 $ 28,600 $ 329,110 $ 146,510
Employees 21 50 100 213
Personnel costs 22 51 76 152
Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
In the first step of the allocation, the amount of Personnel Department cost allocated to the
Family Medicine Department is closest to:
A) $9,704
B) $12,196
C) $21,208
D) $10,600
68) 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 Information Technology Family Medicine Geriatric
Medicine
Departmental costs $ 66,930 $ 11,678 $ 563,940 $ 82,310
Employees 11 27 104 160
Personnel costs 11 27 85 87
Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
In the first step of the allocation, the amount of Personnel Department cost allocated to the
Family Medicine Department is closest to:
A) $23,920
B) $58,405
C) $23,049
D) $26,366
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69) 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 Information Technology Family Medicine Geriatric
Medicine
Departmental costs $ 65,688 $ 25,504 $ 329,040 $ 146,440
Employees 14 25 140 192
Personnel costs 15 26 75 138
Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
The total Geriatric Medicine Department cost after allocations is closest to:
A) $165,638
B) $188,549
C) $201,272
D) $201,261
70) 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 Information Technology Family Medicine Geriatric
Medicine
Departmental costs $ 66,930 $ 11,678 $ 563,940 $ 82,310
Employees 11 27 104 160
Personnel costs 11 27 85 87
Personnel costs are allocated first on the basis of employees and Information Technology costs
are allocated second on the basis of Personnel costs.
The total Geriatric Medicine Department cost after allocations is closest to:
A) $122,608
B) $128,781
C) $128,158
D) $91,358
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71) The order in which the costs of service departments are allocated will affect the amounts
allocated to an operating department when the direct method is used.
⊚ true
⊚ false
72) In both the direct and step-down methods of allocating service department costs, any
amount of the allocation base that is attributable to the service department whose cost is being
allocated is ignored.
⊚ true
⊚ false
73) The step-down method of cost allocation is more accurate than the direct method because
the step-down method takes into account the services that service departments provide to each
other.
⊚ true
⊚ false
74) The step-down method of service department cost allocation ignores interdepartmental
services provided from one service department to another service department and allocates all
service department costs directly to operating departments.
⊚ true
⊚ false
75) Under the step-down method of cost allocation, the service department that provides the
least amount of service to the other departments should be allocated first.
⊚ true
⊚ false
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76) The step-down method ultimately results in less total cost being allocated to operating
departments than the direct method.
⊚ true
⊚ false
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Answer Key
Test name: chapter 4B
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