Reference no: EM13874401

GB Service Corporation has two service departments, Administration and Accounting, and two operating departments, East and West. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of GB operations follows:

	Administration	Administration	East	West
Employees	-	25	$24,000	60
Transactions	50,000	-	10,000	40,000
Department direct costs	$60,000	$24,000	$156,000	$600,000

Required

a. Allocate the cost of the service departments to the operating departments using the direct method.

b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.

c. Allocate the cost of the service departments to the operating departments using the reciprocal method.

d. Comment on the results.