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:

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.

d. Comment on the results.

Transcribed Image Text:

Employees Hours.. Department direct costs. Personnel Legal 40 10,800 $300,000 $160,000 Eastern 120 5,400 $1,200,000 Western 40 1,800 $790,000