Heidaka Trust Corporation has two service departments: actuary and economic analysis. Heidaka also has three operating departments: annuity, fund management, and employee benefit services. The annual costs of operating the service departments are $480,000 for actuary and $800,000 for economic analysis. Heidaka uses the direct method to allocate service center costs to operating departments. Other relevant data follow:

Required

a. Use operating costs as the cost driver for allocating service center costs to operating departments.

b. Use revenue as the cost driver for allocating service center costs to operating departments.

Transcribed Image Text:

Operating Costs* Revenue Annuity Fund management Employee benefit services $500,000 900,000 600,000 1,260,000 1,100,000 *The operating costs are measured before allocating service center costs.