Fifth Street Publishing (FSP) was founded many years ago as a printing cooperative offering printing services to members. Most members were charitable and religious organizations. Ten years ago, FSP became a for-profit corporation, although it retained its commitment to the original member groups. It has two production departments, Member and Commercial. The Member Department handles printing jobs for nonprofit groups and Commercial serves the remaining customers. FSP is organized this way to facilitate its billing: FSP charges nonprofit customers a price equal to the full cost of the job, including allocated overhead; commercial jobs are priced based on what the market will bear. FSP has two service departments, Accounting and Computer Services (CS). Accounting costs are allocated based on number of employees, and CS costs are allocated based on computer time (hours). Selected percentage use data follow:

	Using Department
Supplying Department	Accounting			Computer Services			Member			Commercial
Accounting (employees)		0	%		20	%		10	%		70	%
Computer Services (hours)		30			0			20			50
Direct cost	$	12,000		$	36,000		$	110,000		$	340,000

3.

value: 20.00 points

Required information

Required:

a. Suppose FSP allocated service department costs using the direct method. What is the amount of service department costs that will be allocated to each of the production departments? (Do not round intermediate calculations.)

References

eBook & Resources

WorksheetLearning Objective: 11-02 Allocate service department costs using the direct method.Learning Objective: 11-04 Allocate service department costs using the reciprocal method.

Difficulty: 3 HardLearning Objective: 11-03 Allocate service department costs using the step method.

Check my work

4.

value: 20.00 points

Required information

b. Suppose that, after reviewing the results, the controller tells the cost accountant to change the percentage of computer time so 40 percent is shown as used by the Member Department and 50 percent is shown as used by the Commercial Department. Would this be ethical?

Yes

No

References

eBook & Resources

Yes / NoLearning Objective: 11-02 Allocate service department costs using the direct method.Learning Objective: 11-04 Allocate service department costs using the reciprocal method.

Difficulty: 3 HardLearning Objective: 11-03 Allocate service department costs using the step method.

5.

value: 20.00 points

Required information

c. Suppose the controller tells the cost accountant to use employee wages instead of number of employees to allocate accounting department cost. Employees in the Commercial Department earn lower salaries. Based on the above assumption, choose the correct statement(s) from below (Select all that apply):

If it is done simply to shift cost to the one department, it seems to be unethical.

If it is done simply to shift cost to the one department, it doesn't seem to be unethical.

If the accounting staff has more paperwork because of the higher wages, then this request is unethical.

If the accounting staff has more paperwork because of the higher wages, then this request is not unethical.

References

eBook & Resources

Check All That ApplyLearning Objective: 11-02 Allocate service department costs using the direct method.Learning Objective: 11-04 Allocate service department costs using the reciprocal method.

Difficulty: 3 HardLearning Objective: 11-03 Allocate service department costs using the step method.

6.

value: 20.00 points

Required information

d. Although FSP's policy is to allocate service department costs using the direct method, the controller asks the cost accountant to allocate the costs using the step method, allocating Computer Service Department costs first. What is the amount of service department costs that will be allocated to each of the production departments? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)

References

eBook & Resources

WorksheetLearning Objective: 11-02 Allocate service department costs using the direct method.Learning Objective: 11-04 Allocate service department costs using the reciprocal method.

Difficulty: 3 HardLearning Objective: 11-03 Allocate service department costs using the step method.

Check my work

7.

value: 20.00 points

Required information

e. The controller next asks the cost accountant to allocate the costs using the reciprocal method. What is the amount of service department costs that will be allocated to each of the production departments? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)

References

eBook & Resources

WorksheetLearning Objective: 11-02 Allocate service department costs using the direct method.Learning Objective: 11-04 Allocate service department costs using the reciprocal method.

Difficulty: 3 HardLearning Objective: 11-03 Allocate service department costs using the step method.

Check my work

8.

value: 20.00 points

Required information

f. Suppose the controller tells the cost accountant to use each month the method that allocates the highest cost to the Member Department. Would this be ethical?

Yes

No