Steven Parker owns and operates Steven's Septic Service and Legal Advice. Steven's two revenue generating (production) o...
Steven Parker owns and operates Steven's Septic Service and
Legal Advice. Steven's two revenue generating (production)
operations are supported by two service departments: Clerical and
Janitorial. Costs in the service departments are allocated in the
following order using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed.
Fixed cost: long-run average number of work orders processed.
Janitorial:
Variable cost: labor hours.
Fixed cost: square footage of space occupied.
Average and expected activity levels for next month (June) are as
follows:
| No. of Work Orders | ||||
| Expected | Average | Labor Hours | Square Footage | |
| Septic Service | 45 | 80 | 710 | 1,950 |
| Legal advice | 30 | 25 | 990 | 2,350 |
| Clerical | 20 | 20 | 550 | 1,750 |
| Janitorial | 5 | 15 | 350 | 1,150 |
Expected costs in the service departments for June are as
follows:
| Clerical | Janitorial | |||||
| Variable costs | $ | 14,000 | $ | 5,700 | ||
| Fixed costs | $ | 9,900 | $ | 950 | ||
Under the step method of allocation, how much Clerical Service cost
should be allocated to the Septic Service operation for June?
(Assume Clerical costs are allocated before Janitorial costs and
round all calculations to the nearest whole dollar.)
rev: 08_19_2019_QC_CS-174994
-
$14,988.
-
$14,475.
-
$15,145.
-
$18,795.
Homework Answers
Total expected number of work orders processed other than Clerical Service= 45+30+5= 80
Clerical service variable cost that should be allocated to Septic Service operation for June= $14000*45/80= $7875
Total average number of work orders processed other than Clerical Service= 80+25+15= 120
Clerical service fixed cost that should be allocated to Septic Service operation for June= $9900*80/120= $6600
Total Clerical Service cost should be allocated to the Septic Service operation for June= $7875+6600= $14475
So, the answer is option B) $14475
Add Answer to:
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