(Comprehensive service department allocations) As the controller for Reed Newspapers, you have been asked to allocate the costs of the paper’s two service departments, administration and human resources, to the two revenue-generating departments, advertising and circulation. Administration costs are to be allocated on the basis of dollars of assets employed; human resources costs are to be allocated on the basis of number of employees.

The following costs and allocation bases are available:

a. Using the direct method, allocate the service department costs to the revenue-generating departments.

b. Using your answer to part (a), what are the total costs of the revenue¬ generating departments after the allocations?
C. Assuming that the benefits-provided ranking is the order shown in the table, use the step method to allocate the service department costs to the revenue-generating departments.

d. Using your answer to part (c), what are the total costs of the revenue¬ generating departments after the allocations?

e. Using the algebraic method, allocate the service department costs to the revenue-generating departments. LO.1

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Number of Employees 10 Dollars of Assets Employed $ 387,100 291,700 762,400 1,870,300 $3,311,500 Department Direct Costs Administration $ 781,500 Human resources 492,700 7 Advertising 957,800 12 Circulation Totals 1,352,600 25 $3,584,600 54