Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (West and East). The usage data for each of the service departments for the previous period follow: IT Accounting HR IT Accounting 0% HR West 0% 10% 20% 0% 10% East 40% 40% 40% 60% 60% 20% The direct costs of the service departments in the previous period were $90,250 for IT, $113,000 for Accounting, and $147,500 for HR. Required: Use the step method to allocate the service department costs to the two production departments. Allocate HR costs first, followed by IT, and then Accounting. Note: Amounts to be deducted should be indicated by a minus sign. Service department costs HR allocation IT Accounting HR West East IT allocation Accounting allocation Total costs allocated $ 0 $ 0 $ 0 $ 0 $ 0

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...
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Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (West
and East). The usage data for each of the service departments for the previous period follow:
IT
Accounting
HR
IT
Accounting
0%
HR
West East
0%
10%
20%
0%
10%
40% 40%
40% 60%
60%
20%
The direct costs of the service departments in the previous period were $90,250 for IT, $113,000 for Accounting, and $147,500 for HR.
Required:
Use the step method to allocate the service department costs to the two production departments. Allocate HR costs first, followed by
IT, and then Accounting.
Note: Amounts to be deducted should be indicated by a minus sign.
Service department costs
HR allocation
IT
Accounting
HR
West
East
IT allocation
Accounting allocation
Total costs allocated
$
0 $
0 $
0 $
0 $
0
Transcribed Image Text:Memorial Services, Incorporated (MSI) has three service departments (IT, Accounting, and HR) and two production departments (West and East). The usage data for each of the service departments for the previous period follow: IT Accounting HR IT Accounting 0% HR West East 0% 10% 20% 0% 10% 40% 40% 40% 60% 60% 20% The direct costs of the service departments in the previous period were $90,250 for IT, $113,000 for Accounting, and $147,500 for HR. Required: Use the step method to allocate the service department costs to the two production departments. Allocate HR costs first, followed by IT, and then Accounting. Note: Amounts to be deducted should be indicated by a minus sign. Service department costs HR allocation IT Accounting HR West East IT allocation Accounting allocation Total costs allocated $ 0 $ 0 $ 0 $ 0 $ 0
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