Question
Steven Parker owns and operates Steven's Septic Service and Legal Advice. Steven's two revenue generating (production) operations are supported by two service departments: Clerical and
Steven Parker owns and operates Steven's Septic Service and Legal Advice. Steven's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases: Clerical: Variable cost: expected number of work orders processed Fixed cost: long-run average number of work orders processed Janitorial: Variable cost: labor hours Fixed cost: square footage of space occupied Average and expected activity levels for next month (June) are as follows:
No. of Work Orders Expected | Average | Labor Hours | Square Footage | |
Septic Service | 50 | 80 | 640 | 1,890 |
Legal advice | 25 | 20 | 960 | 2,310 |
Clerical | 20 | 20 | 420 | 1,620 |
Janitorial | 5 | 20 | 220 | 1,020 |
Expected costs in the service departments for June are as follows:
Clerical | Janitorial | |||||
Variable costs | $ | 12,600 | $ | 4,900 | ||
Fixed costs | $ | 8,100 | $ | 840 | ||
Under the direct method of allocation, what is the total amount of service cost allocated to the Legal Advice operation for June? (Round all calculations to the nearest whole dollar.)
$9,222.
$9,952.
$6,671.
$8,650.
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