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Springfield Power Plant services both residential and commercial customers. The company has four departments: Safety, IT, Residential, and Commercial. The Safety and IT departments provide
Springfield Power Plant services both residential and commercial customers. The company has four departments: Safety, IT, Residential, and Commercial. The Safety and IT departments provide support services for each other as well as for the operating departments. The two operating departments run completely independently of each other. Residential and Commercial uses the total dollars spent to allocate Safety costs, and the total number of employees to allocate IT costs. The following data is available at the end of the year: Service Departments Operating Departments Commercial Costs incurred before allocations Total dollars spent Number of employees Safety 950,000 IT Residential 750,000 1,200,000 1,800,000 200,000 550,000 850,000 25 25 75 300 REQUIRED: a. Assume that Springfield Power Plant allocates the costs of its support departments to the operating departments using the direct method. Calculate the total cost, including allocations, of each of the two operating departments. (2 Marks) b. Disregard your answer to (a). Assume that Springfield allocates the costs of its support departments to the operating departments using the step-down method based on the percentage of their services provided to other support departments. Calculate the total cost, including allocations, of each of the two operating departments. (3 Marks) c. Disregard your answers to (a) and (b). Assume that Springfield allocates the costs of its support departments to the operating departments using the reciprocal method. Calculate the total cost, including allocations, of each of the two operating departments
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