The Newman School of Vocational Technology has organized the school training programs into three departments. Each department provides training in a different area as follows: nursing assistant, dental hygiene, and office technology. The school’s owner, Lucy Newman, wants to know how much it costs to operate each of the three departments. To accumulate the total cost for each department, the accountant has identified several indirect costs that must be allocated to each. These costs are \($15,750\) of phone expense, \($3,360\) of office supplies, \($864,000\) of office rent, \($96,000\) ofjanitorial services, and \($72,000\) of salary paid to the dean of students. To provide a reasonably accurate allocation of costs, the accountant has identified several possible cost drivers. These drivers and their association with each department follow.

Required:

a. Identify the appropriate cost objects.

b. Identify the appropriate cost driver for each indirect cost and compute the allocation rate for assigning each indirect cost to the cost objects.

c. Determine the amount of telephone expense that should be allocated to each of the three departments.

d. Determine the amount of supplies expense that should be allocated to Department 3.

e. Determine the amount of office rent that should be allocated to Department 2.

f. Determine the amount of janitorial services cost that should be allocated to Department 1.
g. Identify two cost drivers not listed here that could be used to allocate the cost of the dean’s salary to the three departments.

Transcribed Image Text:

Cost Driver Department 1 Department 2 Department 3 Number of telephones 28 16 19 Number of faculty members 20 16 12 Square footage of office space 24,000 14,000 10,000 Number of secretaries 2 2