Question
Service department costing (5 marks) Top2Toe is a boutique store that sells high-fashion hats and shoes in the downtown section of the city. The companys
- Service department costing (5 marks) Top2Toe is a boutique store that sells high-fashion hats and shoes in the downtown section of the city. The companys controller assesses the manager of each department on their ability to control costs. As such, he wants to properly allocate the cost of their two major service departments: Janitorial and Human resources to their two sales departments, Shoes and Hats.
Note that Janitorial and Human resources also provide services to each other. Janitorial costs are allocated by square feet and Human resources costs are allocated by number of employees. Data for August are provided below.
August data | Human resources | Janitorial | Shoes | Hats |
Budgeted costs | $13,800 | $6,400 | $40,000 | $31,500 |
Actual costs | $14,300 | $5,800 | $52,000 | $29,500 |
Actual square feet of department | 612 | 1,200 | 1,088 | 1,700 |
Actual number of employees | 10 | 21 | 15 | 24 |
Currently, the controller uses the Step method to allocate service department costs to operating departments. Human resources is allocated first, then Janitorial.
Required
Calculate the costs of the Janitorial department that would be allocated to the Shoes Department for August using the appropriate figures and the controllers current method of service department cost allocation. (3 marks)
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