Question

Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the Computing Department. The bank has two other departments that directly service customers, the Deposit Department and the Loan Department. The usage of the two service departments' output for the year is as follows: Provider of Service User of Service Computing 20 % HR HR Computing Deposit 20% 60% 65% 15% 20% Loan The budgeted costs in the two service departments for the year are as follows: $509,000 HR Computing 738,500 Required: Use the reciprocal-services method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. (Do not round your intermediate calculations and round final answers to the nearest dollar amount.) Provider of Service Deposit Loan Allocation of HR Department costs Allocation of Computing Department costs 76,350 330,850 $ 443,100 147,700 Total costs allocated to each department 773,950 $ 224,050

Answer 1

Allocating Costs
Provider of service			HR	Computing	Deposit	Loan
Costs			$ 509,000.00	$ 738,500.00	$                 -	$                 -
Allocating costs of:
HR			$(684,062.50)	$ 136,812.50	$      444,641	$      102,609
Computing			$ 175,062.50	$(875,312.50)	$      525,188	$      175,063
Allocated costs			$                   -	$                   -	$      969,828	$      277,672

Workings:

Let the total cost of HR and Computing be x and y
x = $ 509000 + 20% of y			or, x = $ 509000 + 0.2y			(i)
y = $ 738500 + 20% of x			or, y = $ 738500 + 0.2x			(ii)
Putting the value of x in equation (ii) we get,
y = $ 738500 + 0.2($ 509000 + 0.2y)
y = $ 738500 + $ 101800 + 0.04y
0.96y = $ 840300
y = $ 875312.5
Therefore, x = $ 509000 + 0.2($ 875312.5)
	x = $ 684062.5