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Compton Information Services, Ic., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Health Legal Services Human Resources Billing Care Retail Number of employees 10 20 80 60 40 $2,800,000 $4,800,000 Annual cost* $720,000 $1,428,000 $6,000,000 $9,000,000 $4,800,000 $6,200,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs.

Compton Information Services, Ic., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Health Legal Services Human Resources Billing Care Retail Number of employees 10 20 80 60 40 $2,800,000 $4,800,000 Annual cost* $720,000 $1,428,000 $6,000,000 $9,000,000 $4,800,000 $6,200,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs.

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter4: Accounting For Factory Overhead
Section: Chapter Questions
Problem 9E: A manufacturing company has two service and two production departments. Human Resources and Machine...
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Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Human Health Legal Resources Billing Care Retail Services Number of employees 10 20 80 60 40 Annual cost* $4,800,000 $6,200,000 $720,000 $1,428,000 $6,000,000 $9,000,000 $2,800,000 $4,800,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Compton adopts the direct method. The company uses the number of employees as the base for allocating the human resources department costs and department annual revenue as the base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method. Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Reg B2 Req C1 Req C2 Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the department annual revenue as the base for allocating the billing department costs. (Round "Allocation rate" to 3 decimal places.) Allocation Rate Weight of Base Allocated Department Cost Health Care $ 9,000,000 = $ Retail 0.100 x 6,200,000 = 620,000 Legal Services 0.100 x 4,800,000 = 480,000 Total $ 1,100,000
Transcribed Image Text:Compton Information Services, Inc., has two service departments: human resources and billing. Compton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Human Health Legal Resources Billing Care Retail Services Number of employees 10 20 80 60 40 Annual cost* $4,800,000 $6,200,000 $720,000 $1,428,000 $6,000,000 $9,000,000 $2,800,000 $4,800,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Compton adopts the direct method. The company uses the number of employees as the base for allocating the human resources department costs and department annual revenue as the base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method. Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Reg B2 Req C1 Req C2 Allocate service department costs to operating departments, assuming that Compton adopts the step method. The company uses the department annual revenue as the base for allocating the billing department costs. (Round "Allocation rate" to 3 decimal places.) Allocation Rate Weight of Base Allocated Department Cost Health Care $ 9,000,000 = $ Retail 0.100 x 6,200,000 = 620,000 Legal Services 0.100 x 4,800,000 = 480,000 Total $ 1,100,000
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