Rundle Information Services, Inc., has two service departments: human resources and billing. Rundle's operating departments, organized...

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Rundle Information Services, Inc., has two service departments: human resources and billing. Rundles operating departments,

a. Allocate service department costs to operating departments, assuming that Rundle adopts the step method. The company uses

required a. Allocate service department costs to operating departments, assuming that Rundle adopts the step method. The comp

business accounting

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Answer 1

Answer #1

Answer: a-1) Human Resource Department cost allocation - Step Method

Department	Allocation Rate	x	Weight of Base	=	Allocated Cost
Billing	1,800	x	50	=	90,000
Healthcare	1,800	x	201	=	361,800
Retail	1,800	x	151	=	271,800
Legal Services	1,800	x	98	=	176,400
Total			500		900,000

a-2) Billing Department cost allocation - Step Method

Department	Allocation Rate	x	Weight of Base	=	Allocated Cost
Healthcare	0.1	x	10,100,000	=	1,010,000
Retail	0.1	x	5,650,000	=	565,000
Legal Services	0.1	x	4,250,000	=	425,000
Total			20,000,000		2,000,000

Working:

Billing Department Cost = Annual cost + Allocated cost to HR Department

= $ 1,910,000 + 90,000

= $2,000,000

b-2) Human Resource Department cost allocation - Direct Method

Department	Allocation Rate	x	Weight of Base	=	Allocated Cost
Healthcare	2,000	x	201	=	402,000
Retail	2,000	x	151	=	302,000
Legal Services	2,000	x	98	=	196,000
Total			450		900,000

b-2) Billing Department cost allocation - Direct Method

Department	Allocation Rate	x	Weight of Base	=	Allocated Cost
Healthcare	0.0955	x	10,100,000	=	964,550
Retail	0.0955	x	5,650,000	=	539,575
Legal Services	0.0955	x	4,250,000	=	405,875
Total			20,000,000		1,910,000

c-1) Total Allocated Cost - Step Method

Department	Human Resources	+	Billing	=	Total Allocated Cost
Healthcare	361,800	+	1,010,000	=	1,371,800
Retail	271,800	+	565,000	=	836,000
Legal Services	176,400	+	425,000	=	601,400
TOTAL					2,809,200

c-2) Total Allocated Cost - Direct Method

Department	Human Resources	+	Billing	=	Total Allocated Cost
Healthcare	402,000	+	964,550	=	1,366,550
Retail	302,000	+	539,575	=	841,575
Legal Services	196,000	+	405,875	=	601,875
TOTAL					2,810,000

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