Smith Corporation has two service departments: Data Processing and Personnel. Data Processing provides more service than does Personnel. Smith Corporation also has two production departments: A and B. Data Processing costs are allocated on the basis of assets used while Personnel costs are allocated based on the number of employees.

Department Direct costs Employees Assets used

Data Processing $1,000,000 15 $700,000

Personnel 300,000 8 230,000

A 500,000 12 125,000

B 330,000 20 220,000

1. Using the direct method, total cost allocated to Department A is (round to the nearest dollar):

a)$362,319

b)$474,819

c)$549,819

d)$637,681

2. Using the step method, total cost allocated to Department B is (round to the nearest dollar):

a)$382,609

b)$437,500

c)$570,109

d)$820,109

3. If Smith Corporation distributes service department overhead costs based on the algebraic method, what would be the formula to determine the total Data Processing costs?

a)DP = $1,000,000 + 15/47 P

b)DP = $300,000 + 230/575 P

c)DP = $1,000,000 + 15/47 P + 12/47 A + 20/47 B

d)DP = $300,000 + 12/47 A + 20/47 B