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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees,

BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.

Administration Accounting Domestic International
Employees 28 46 26
Transactions 32,000 25,000 100,000
Department direct costs $ 363,000 $ 145,000 $ 935,000 $ 3,590,000

Required:

a. Allocate the cost of the service departments to the operating departments using the direct method. b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration. c. Allocate the cost of the service departments to the operating departments using the reciprocal method

  • Required A
  • Required B
  • Required C

Allocate the cost of the service departments to the operating departments using the direct method. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)

To
From Administration Accounting Domestic International
Department costs $363,000 $145,000 $935,000 $3,590,000
Administration allocation (363,000)
Accounting allocation 0
Total cost $0 $145,000 $935,000 $3,590,000

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