Interdepartment Services: Step Method (LO2)

O’Brian’s Department Stores allocates the costs of the Personnel and Payroll departments to three retail sales departments, Housewares, Clothing, and Furniture. In addition to providing services to the operating departments, Personnel and Payroll provide services to each other. O’Brian’s allocates Personnel Department costs on the basis of the number of employees and Payroll Department costs on the basis of gross payroll. Cost and allocation information for June is as follows:

Personnel Payroll Housewares _ Clothing Furniture Direct department cost ....... $6,900 $3,200 $12,200 $20,000 $15,750 Number of employees ........ S 3 8 is 4 SrOssipayrolliers see erence: $6,000 $3,300 $11,200 $17,400 $8,100 Required

a. Determine the percentage of total Personnel Department services that was provided to the Payroll Department.

b. Determine the percentage of total Payroll Department services that was provided to the Personnel Department.

c. Prepare a schedule showing Personnel Department and Payroll Department cost allocations to the operating departments, assuming O’Brian’s uses the step method. (Round calculations to the nearest dollar.)