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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: Employees Transactions Department direct costs Administration Accounting 23 37,000 $356,000 $148,000 Domestic 50 21,000 $935,000 International 27 84,000 $3,660,000 Required: a. 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 Domestic International Department costs Administration allocation Accounting allocation Administration Accounting $ 356,000 $ 148,000 $ (356,000) (148,000) 935,000 $ 231,169 31,813 1,197,982 $ 3,660,000 124,831 116,187 3,901,018 Totals $ 0 $ 0 b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.) To From Administration $ 356,000 (356,000) Department costs Administration allocation Accounting allocation Total cost allocated Accounting Domestic International $ 148,000 $ 935,000 $ 3,660,000 81,880 178,000 96,120 166,355 279,477 $ 229,880 $ 1,279,355 $ 4,035,597 $ 0 c. Allocate the cost of the service departments to the operating departments using the reciprocal method. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.) From To Administration Accounting Domestic International $ 356,000 $ 148,000 $ 935,000 $ 3,660,000 Department costs Administration allocation Accounting allocation Total cost allocated $ 356,000 $ 148,000 $ 935,000 $ 3,660,000
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