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Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are
Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments but the human resources department supports all operating departments and the billing department. Other relevant information follows Legal Human Resources Billing Health Care RetailServices 10 Number of employees Annual cost* Annual revenue 20 80 60 40 $720,000 $1,428,000 $6,000,000 $4,800,000 $2,800,000 -$9,000,000 $6,200,000 $ 4,800,000 *This is the operating cost before allocating service department costs Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs
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