Morrell Financial Services (MFS) has three service departments: Accounting, Information Technology (IT), and Personnel. MFS also hastwo operating departments (Advice and Brokerage). Data on service department usage and service direct costs follow:AccountingITPersonnelDirect costUsing DepartmentAccountingITPersonnelAdvice0%16%6%23%31%Brokerage40%0%10%29%45%11%13%0%39%37%$ 197,000$ 281,000$ 264,500NANA**Not applicable for this problem.Required:Assume that Morrell Financial Services uses the reciprocal method of service department cost allocation. What is the total servicedepartment cost allocated to Advice? To Brokerage? (Hint: Use the reciprocal method spreadsheet shown in Exhibit 11.22 as a start toyour analysis.)Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollars.AdviceBrokerageCost Allocated

Reciprocal Method of Cost Allocation:The reciprocal method of cost allocation is a technique used in…

Answered: Assume that Morrell Financial Services…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter25: Departmental Accounting

Section: Chapter Questions

Problem 6SEB

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Solomon Information Services, Incorporated, has two service departments: human resources and billing. Solomon's operating departments, organized according to the special Industry each department serves, are health care, retall, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Number of employees Annual cost Annual revenue Req A1 Human Resources Department Reg A2 Billing Health Care Retail Legal Services Total *This is the operating cost before allocating service department costs. Allocation Rate 20 Req B1 $ 900,000 Complete this question by entering your answers in the tabs below. x X Billing Required a. Allocate service department costs to operating departments, assuming that Solomon adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and…
Comprehensive Insurance Company has three operating departments: claims processing, administration, and sales. These three operating departments are supported by two service departments: information technology and accounting. The support provided by information technology and accounting to the other departments is shown below. Operating Departments Sales Total costs Information technology Accounting The total costs incurred in the five departments are: Information technology Accounting Claims processing Administration a. Direct Method b. Service Departments Step Method (Info Tech First) Step Method (Accounting First) Information Technology 10% c. Reciprocal Method Accounting 20% $ 579,000 1,580,000 270,000 551,000 600,000 $ 3,580,000 Required: Determine the total costs in each of the three operating departments, after departmental allocations, using (a) the direct method, (b) the step method (first for information technology going first in the allocation and then for accounting going…
Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Employees Hours Department direct costs Required A Complete this question by entering your answers in the tabs below. Department costs Personnel allocation Legal allocation Total costs Costs Department costs Legal allocation Personnel allocation Total costs Personnel Required B Required C Legal Required: a. Allocate the cost of the service departments to the operating divisions using the direct method. b. Allocate the cost of the service departments to the operating divisions using the step method. Start with Legal. c. Allocate the cost of the service departments to the operating divisions using the reciprocal method. From Total Allocate the cost of the service departments to the operating divisions using the direct…
(Ch 8) Which departments in an organization produce services for external customers? Question 1 options: Support departments. Dual-rate departments. Operating departments. Sales departments. (Ch 8) When allocating support department costs, managers must identify cost pools. The choice of cost pools is: Question 2 options: not influenced by the allocation base. not important, because all support department costs will eventually be allocated anyway. influenced by the design of the accounting information system. determined by whether a company uses IFRS or ASPE.
Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: IT tickets Employees Department direct costs Service department costs IT allocation HR allocation Total costs allocated IT $ IT 0 27 $ 151,000 0 $ HR Required: Use the direct method to allocate these service department costs to the operating departments. 1,400 0 Note: Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations. Round "Publishing" and "Binding" answers to 2 decimal places. HR $247,500 Publishing 1,400 35 $430,000 0 Publishing 0 $ Binding 4,200 51 $ 390,000 0.00 $ Binding 0.00
ABC Bank would like to determine the price to charge for customer services and which classes of customers should be emphasized or de-emphasized. It has provided details of the activities and the cost drivers relating to those expenses that can be attributed to customers as follows: Activity Activity costs (R) Activity driver Activity volume Providing ATM services 400 000 Number of transactions 200 000 Computer processing 1 300 000 Number of transactions 2 500 000 Issuing Statements 1 100 000 Number of statements 500 000 Collections 160 000 Number of transactions 100 000 Customer inquiries 660 000 Telephone minutes 600 000 The following are annual information on the four types of customers: Personal Loans Cheque accounts Platinum accounts Savings accounts Number of product 7 000 28 000 12 000 2 000 ATM transactions 0 160 000 18 000 20 000 Computer transactions 210 000…
Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: IT tickets Employees Department direct costs Service department costs IT allocation HR allocation Total costs allocated IT IT 0 33 $ 157,000 HR HR 1,500 0 $ 247,500 Publishing 1,500 41 $ 430,000 Required: Use the direct method to allocate these service department costs to the operating departments. Note: Amounts to be deducted should be Indicated by a minus sign. Do not round Intermediate calculations. Round "Publishing" and "Binding" answers to 2 decimal places. Binding Publishing 4,500 57 $ 390,000 AL Binding
D. ABC Company is a manufacturer of electronic parts and uses a service department charge system to charge profit centers. The following table identifies the service categories, costs and activity bases used by CCS Division. CCS Division Help desk Network center Electronic mail Local voice support Activity Base Number of calls Number of devices monitored Number of user account Number of phone extension C. d. Assumed Cost 73,600 614,250 53,550 127,238 Assumed Activity Base Quantity 2,300 calls 9,450 devices 6,300 accounts 8,775 extensions One of the profit centers for ABC Company is the Calamba Branch. Assume the following data for Calamba Branch: a. The branch has 4,000 employees of which 50% are office employees. b. All the office employees have a phone and 90% of them have a computer on the network. Ninety percent of the employees with a computer also have an email account. The average number of help desk calls for March 20X2 was .50 call per individual with a computer. e. There are…
Yekka Corporation has two producing department and two service departments labeled P1, P2, S1 and S2, respectively. Direct costs for each department and the proportion of services costs used by various departments are as follows: Cost Center Direct Costs Proportion of services used by: S1 S2 P1 P2 P1 90,000 P2 60,000 S1 20,000 - .80 .1 .1 S2 32,000 .20 - .50 .30 In calculating predetermined overhead rates, machine hours are used as the base in P1 and direct labor hours as the base in P2. P1 P2 Machine hours 50,000 40,000 Direct labor hours 40,000 20,000 Requirements: Allocate the service department costs to operating departments and compute the factory…
Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: \table[[,IT,HR,Publishing,Binding],[,0,1,550,2,480,2,170],[IT tickets,16,0,24,40],[\table[[Employees],[Department direct costs]],$154,000,$248,400,$432,000,$395,000
In each blank next to the following terms, place the identifying letter of its best description. 1. Cost center 2. Profit center 3. Responsibility accounting system 4. Service department 5. Indirect expenses 6. Controllable costs A. Incurs costs without directly yielding revenues. B. Provides information used to evaluate the performance of a department. C. Does not directly manufacture products but contributes to profitability of the entire company. D. Costs incurred for the joint benefit of more than one department. E. Costs that a manager has the ability to affect. F. Incurs costs and also generates revenues.
The Bramble Company makes wheels and wings for ground transport vehicles and drones. In addition to the key manufacturing departments, Bramble needs two key support services, provided by its Maintenance and IT departments. The Maintenance costs are allocated to other departments based on the square footage of space each department occupies. The IT department allocates its costs to other departments based on the amount of time the IT employees spend assisting the other departments. The cost information of all four departments, along with their usage information for both allocation bases, is as follows. Initial cost Square feet occupied IT labor hours used Support Departments Maintenance IT $120.000 $74.000 1,100 1.800 1,100 Operating Departments Wheels $396,000 2,160 2,280 Wings $700,000 5,040 h 1.720 Totals $1,290,000 10,100 5,100

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Assume that Morrell Financial Services uses the reciprocal method of service department cost allocation. What is the total service department cost allocated to Advice? To Brokerage? (Hint: Use the reciprocal method spreadsheet shown in Exhibit 11.22 as a start to your analysis.)