Second Company has three service departments, Administration, Communications and Facilities,

and two production departments, Deposits and Loans. A summary of costs and other data for

each department prior to allocation of service department costs for the year ended December 31

follows:

Administration Communication Facilities Deposits Loans

Direct Costs

P200,000

P300,000 P254,000 P8,000,000 P5,000,000

Employee hours

24,800

33,600 21,600 450,000 350,000

No. of employees

9

15

6

210 150

Square footage occupied 4,900 13,440 5,600 246,400 201,600

The costs of the service departments are allocated on the following bases: Administration, employee

hours; Communication, number of employees; and Facilities, square footage occupied.

a.

Assume that the bank elects to distribute service department costs to production departments

using direct method, determine the total costs of each department after allocation of service

department costs.

b. Assume that the bank elects to distribute service department costs to other departments using

the step method (starting with Facilities and then Communication), determine the total costs of

each department after allocation of service department costs.

c.

Assume that the bank elects to distribute service department costs to other departments using

algebraic method, determine the total costs of each department after allocation of service

department costs.