Reference no: EM132744171
Question - Second Company has three service departments, Administration, Communications and Facilities, and two production departments, Deposits and Loans. A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows:
|
|
Administration
|
Communication
|
Facilities
|
Deposits
|
Loans
|
|
Direct Costs
|
P200,000
|
P300,000
|
P254,000
|
P8,000,000
|
P5,000,000
|
|
Employee hours
|
24,800
|
33,600
|
21,600
|
450,000
|
350,000
|
|
No. of employees
|
9
|
15
|
6
|
210
|
150
|
|
Square footage occupied
|
4,900
|
13,440
|
5,600
|
246,400
|
201,600
|
The costs of the service departments are allocated on the following bases: Administration, employee hours; Communication, number of employees; and Facilities, square footage occupied.
Required -
a. Assume that the bank elects to distribute service department costs to production departments using direct method, determine the total costs of each department after allocation of service department costs.
b. Assume that the bank elects to distribute service department costs to other departments using the step method (starting with Facilities and then Communication), determine the total costs of each department after allocation of service department costs.
c. Assume that the bank elects to distribute service department costs to other departments using algebraic method, determine the total costs of each department after allocation of service department costs.