Deck 21: Service Department Allocations

Question 1

Rondo Children's Clinic allocates service department costs to operating departments using the step-down method.The clinic has two service departments,Administration and Information Technology (IT),and two operating departments,Prenatal and Pediatric.Data concerning those departments follow:
Administration costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.The total Pediatric Department cost after allocations is closest to:

A) $311,117
B) $280,845
C) $304,995
D) $311,400

Answer 1

A
Explanation:
Allocation base for Administration costs = 21 + 118 + 172 = 311
Allocation base for IT costs = 102 + 109 = 211

Question 2

Under the step-down method of cost allocation,the service department that provides the least amount of service to the other departments should be allocated first.

Answer 2

False

Question 3

The direct method is used by Marrero Publishing,Inc.,to allocate service department costs to operating departments.The company has two service departments,Information Technology and Personnel,and two operating departments,Prepress and Printing. Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees.The total Prepress Department cost after service department allocations is closest to:

A) $406,961
B) $413,326
C) $402,881
D) $410,563

Answer 3

B
Explanation:
Allocation base for Information Technology costs = 51 + 38 = 89
Allocation base for Facilities costs = 98 + 30 = 128

Question 4

Kolinski Surgical Hospital uses the direct method to allocate service department costs to operating departments.The hospital has two service departments,Telecommunications and Administration,and two operating departments,Surgery and Recovery. Telecommunications Department costs are allocated on the basis of the number of telecommunications ports in departments and Administration Department costs are allocated on the basis of employees.The total Surgery Department cost after service department allocations is closest to:

A) $317,118
B) $314,853
C) $310,244
D) $305,921

Question 5

The step-down method ultimately results in less total cost being allocated to operating departments than the direct method.

Question 6

Reddicks Clinic uses the step-down method to allocate service department costs to operating departments.The clinic has two service departments,Personnel and Information Technology (IT),and two operating departments,Family Medicine and Pediatrics.Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.The total Pediatrics Department cost after allocations is closest to:

A) $345,462
B) $393,099
C) $392,838
D) $383,307

Question 7

The step-down method of service department cost allocation ignores interdepartmental services provided from one service department to another service department and allocates all service department costs directly to operating departments.

Question 8

In both the direct and step-down methods of allocating service department costs,any amount of the allocation base that is attributable to the service department whose cost is being allocated is ignored.

Question 9

Parker Corporation has two service departments,Cafeteria and Engineering,and two operating departments.The number of employees in each department is given below:
The costs of the Cafeteria are allocated to other departments on the basis of the number of employees in the departments.If these costs are budgeted at $69,375,the amount of Cafeteria cost allocated to Engineering under the direct method would be closest to:

A) $0
B) $3,700
C) $3,750
D) $17,344

Question 10

Cervetti,Inc.,allocates service department costs to operating departments using the step-down method.The company has two service departments,Administration and Physical Plant,and two operating departments,Assembly and Testing.Data concerning those departments follow:
Administration Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied.The total Testing Department cost after allocations is closest to:

A) $754,279
B) $757,240
C) $748,960
D) $757,368

Question 11

The order in which the costs of service departments are allocated will affect the amounts allocated to an operating department when the direct method is used.

Question 12

[Fill in the blank.] Under the __________ method of allocating service department costs,services provided by service departments to other service departments are ignored and all service department costs are allocated directly to the operating departments.

A) step-down
B) weighted-average
C) direct
D) FIFO

Question 13

The step-down method of cost allocation is more accurate than the direct method because the step-down method takes into account the services that service departments provide to each other.

Question 14

Stoltz Corporation uses the direct method to allocate service department costs to operating departments.The company has two service departments,Data Processing and Personnel,and two operating departments,Assembly and Finishing. Data Processing Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees.The total amount of Data Processing Department cost allocated to the two operating departments is closest to:

A) $23,245
B) $26,488
C) $61,567
D) $16,874

Question 15

The step-down method of allocating service department costs:

A) is a less accurate method of allocation than the direct method.
B) can't be used when a company has more than two service departments.
C) is a simpler allocation method than the direct method.
D) ignores some interdepartmental services.

Question 16

Casas Corporation has two service departments,Personnel and Cafeteria,and two operating departments,Customer Care and Customer Solutions.The number of employees in each department are:
The fixed costs of the Personnel Department are allocated on the basis of the number of employees.If these costs are budgeted at $42,150,the amount of Personnel Department cost allocated to the Cafeteria under the step-down method would be closest to:

A) $19,670
B) $5,901
C) $0
D) $5,087

Question 17

Dainels Corporation uses the step-down method to allocate service department costs to operating departments.The company has two service departments,General Management and Physical Plant,and two operating departments,Sales and After-Sales.Data concerning those departments follow:
General Management Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied.The total After-Sales Department cost after allocations is closest to:

A) $516,196
B) $515,880
C) $503,980
D) $513,911

Question 18

Behrend Clinic uses the direct method to allocate service department costs to operating departments.The clinic has two service departments,Personnel and Support,and two operating departments,Prenatal and Pediatrics. Personnel Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet.The total Pediatrics Department cost after the allocations of service department costs is closest to:

A) $441,260
B) $443,660
C) $433,440
D) $444,471

Question 19

(Appendix 4B) Ockey Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Information Technology and Personnel, and two operating departments, Fabrication and Customization.
Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees.
The total amount of Information Technology Department cost allocated to the two operating departments is closest to:

A) $26,880
B) $15,929
C) $58,119
D) $21,943

Question 20

Koehl Corporation uses the direct method to allocate service department costs to operating departments.The company has two service departments,Administrative and Facilities,and two operating departments,Assembly and Wholesaling. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied.The total Wholesaling Department cost after the allocations of service department costs is closest to:

A) $403,990
B) $396,430
C) $403,642
D) $402,601

Question 21

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
Assuming that SJM allocates service department costs using the direct method,the total cost allocated from Cafeteria to Mining would be closest to:

A) $21,687
B) $15,750
C) $23,684
D) $22,500

Question 22

(Appendix 4B) Romain Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Information Technology and Administration, and two operating departments, Surgery and Recovery.
Information Technology Department costs are allocated on the basis of computer workstations and Administration Department costs are allocated on the basis of employees.
The total Surgery Department cost after service department allocations is closest to:

A) $598,249
B) $608,636
C) $602,727
D) $605,827

Question 23

(Appendix 4B) Prestwich Corporation has two service departments and two operating departments. Costs of the Building and Grounds service department are allocated to other departments on the basis of square feet of space occupied. The departments in the company and the amount of space occupied by each are presented below:
Budgeted costs in the Building and Grounds department total $34,800 for the year.
Assuming the step-down method is used and Building and Grounds costs are allocated first,the amount of Building and Grounds costs allocated to the Cafeteria would be:

A) $0
B) $4,800
C) $4,640
D) $5,568

Question 24

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
Assume that SJM uses the step-down method to allocate service department costs,starting with Maintenance.The total overhead allocated from Maintenance to Mining would be closest to:

A) $25,143
B) $22,957
C) $51,150
D) $16,800

Question 25

(Appendix 4B) Ockey Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Information Technology and Personnel, and two operating departments, Fabrication and Customization.
Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees.
The total Fabrication Department cost after service department allocations is closest to:

A) $270,110
B) $277,969
C) $280,623
D) $274,308

Question 26

(Appendix 4B) Watts Corporation has a Custodial Services Department that services the company's Maintenance Department and its two operating departments. Costs of the Custodial Services Department are allocated to other departments on the basis of square feet of space occupied. The amount of space occupied by each department is given below:
Budgeted costs in the Custodial Services Department total $43,200.
Suppose the company uses the step-down method of allocation and the costs of the Custodial Services Department are allocated first.The amount of Custodial Services Department cost allocated to the Maintenance Department would be:

A) $2,592
B) $2,700
C) $2,880
D) $0

Question 27

(Appendix 4B) Strzelecki Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. Data concerning those departments follow:
Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B.
In the first step of the allocation,the amount of Service Department A cost allocated to the Operating Department X is closest to:

A) $24,360
B) $21,924
C) $16,948
D) $24,914

Question 28

(Appendix 4B) The James Corporation has four departments with data as follows:

Cafeteria costs are allocated on the basis of number of employees.If the step-down method is used with costs of the Cafeteria allocated first,the amount of cost allocated from the Cafeteria to Maintenance would be:

A) $0
B) $625
C) $698
D) $750

Question 29

(Appendix 4B) Maute Clinic has two service departments, Administrative and Support, and two operating departments, Adult Medicine and Pediatrics.
The clinic uses the direct method to allocate service department costs to operating departments. Administrative Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet.
The total Pediatrics Department cost after the allocations of service department costs is closest to:

A) $302,436
B) $304,070
C) $304,136
D) $295,810

Question 30

(Appendix 4B) Watts Corporation has a Custodial Services Department that services the company's Maintenance Department and its two operating departments. Costs of the Custodial Services Department are allocated to other departments on the basis of square feet of space occupied. The amount of space occupied by each department is given below:
Budgeted costs in the Custodial Services Department total $43,200.
Suppose the company uses the direct method of allocation.The amount of Custodial Services Department cost allocated to Operating Department 2 would be:

A) $25,920
B) $27,000
C) $28,800
D) $21,600

Question 31

(Appendix 4B) Seidell Corporation has two service departments, Administrative and Facilities, and two operating departments, Assembly and Customer Solutions.
The company uses the direct method to allocate service department costs to operating departments. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied.
The total Customer Solutions Department cost after the allocations of service department costs is closest to:

A) $269,175
B) $254,470
C) $270,593
D) $271,300

Question 32

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
Assume that SJM uses the step-down method to allocate service department costs,starting with Maintenance.The total overhead allocated from Cafeteria to Processing would be closest to:

A) $21,316
B) $22,398
C) $21,279
D) $23,643

Question 33

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
Suppose the company uses the step-down method and Personnel Department costs are allocated first.The amount of the Personnel Department cost allocated to the Engineering Department would be closest to:

A) $16,828
B) $17,714
C) $0
D) $112,189

Question 34

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
Assuming that SJM allocates service department costs using the direct method,the total cost allocated from Maintenance to Processing would be closest to:

A) $21,600
B) $18,783
C) $26,400
D) $20,571

Question 35

(Appendix 4B) Seidell Corporation has two service departments, Administrative and Facilities, and two operating departments, Assembly and Customer Solutions.
The company uses the direct method to allocate service department costs to operating departments. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied.
The total amount of Administrative Department cost allocated to the Assembly Department is closest to:

A) $26,730
B) $25,568
C) $42,414
D) $23,522

Question 36

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
Suppose the company uses the direct method of allocation.The amount of Personnel Department cost that would be allocated to Operating Department 2 would be closest to:

A) $0
B) $84,141.50
C) $79,934.43
D) $94,040.50

Question 37

(Appendix 4B) Romain Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Information Technology and Administration, and two operating departments, Surgery and Recovery.
Information Technology Department costs are allocated on the basis of computer workstations and Administration Department costs are allocated on the basis of employees.
The total amount of Information Technology Department cost allocated to the two operating departments is closest to:

A) $18,019
B) $109,015
C) $21,587
D) $25,956

Question 38

(Appendix 4B) The James Corporation has four departments with data as follows:

Maintenance Department costs are allocated on the basis of labor hours.The amount of cost allocated to Milling from Maintenance under the direct method would be:

A) $5,600
B) $6,720
C) $5,250
D) $5,700

Question 39

(Appendix 4B) Prestwich Corporation has two service departments and two operating departments. Costs of the Building and Grounds service department are allocated to other departments on the basis of square feet of space occupied. The departments in the company and the amount of space occupied by each are presented below:
Budgeted costs in the Building and Grounds department total $34,800 for the year.
The amount of Building and Grounds department cost allocated to Operating Department A under the direct method would be:

A) $0
B) $11,600
C) $12,000
D) $13,920

Question 40

(Appendix 4B) Maute Clinic has two service departments, Administrative and Support, and two operating departments, Adult Medicine and Pediatrics.
The clinic uses the direct method to allocate service department costs to operating departments. Administrative Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet.
The total amount of Administrative Department cost allocated to the Adult Medicine Department is closest to:

A) $13,636
B) $14,610
C) $20,382
D) $15,340

Question 41

Cerce Corporation uses the direct method to allocate service department costs to operating departments.The company has two service departments,Administrative and Facilities,and two operating departments,Assembly and Finishing.
Administrative Department costs are allocated on the basis of employee hours and Facilities Department costs are allocated on the basis of space occupied.
Required:
Allocate the service department costs to the operating departments using the direct method.

Question 42

Georgeson Emergency Care Hospital uses the step-down method to allocate service department costs to operating departments.The hospital has two service departments,Administration and Information Technology (IT),and two operating departments,Emergency Room and Intensive Care.
Administration Department costs are allocated first on the basis of employees and IT Department costs are allocated second on the basis of computers.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 43

(Appendix 4B) Yamane Corporation, a manufacturer, uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Data concerning those departments follow:
Administration Department costs are allocated first on the basis of labor hours and Facilities Department costs are allocated second on the basis of space occupied.
In the first step of the allocation,the amount of Administration Department cost allocated to the Assembly Department is closest to:

A) $4,476
B) $12,838
C) $11,310
D) $12,180

Question 44

(Appendix 4B) Muckenfuss Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Geriatric Medicine. Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
The total Geriatric Medicine Department cost after allocations is closest to:

A) $122,608
B) $128,781
C) $128,158
D) $91,358

Question 45

Vitro Corporation has two service departments,Service Department A and Service Department B,and two operating departments,Operating Department X and Operating Department Y.
The company uses the step-down method to allocate service department costs to operating departments.Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 46

(Appendix 4B) Yamane Corporation, a manufacturer, uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Data concerning those departments follow:
Administration Department costs are allocated first on the basis of labor hours and Facilities Department costs are allocated second on the basis of space occupied.
The total Finishing Department cost after allocations is closest to:

A) $443,342
B) $433,660
C) $441,102
D) $442,940

Question 47

(Appendix 4B) Muckenfuss Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Geriatric Medicine. Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
In the first step of the allocation,the amount of Personnel Department cost allocated to the Family Medicine Department is closest to:

A) $23,920
B) $58,405
C) $23,049
D) $26,366

Question 48

Coakley Corporation uses the step-down method to allocate service department costs to operating departments.The company has two service departments,Administration and Facilities,and two operating departments,Assembly and Finishing.
Administration Department costs are allocated first on the basis of employee time and Facilities Department costs are allocated second on the basis of space occupied.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 49

(Appendix 4B) Blondell Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
The total Corporate Law Department cost after allocations is closest to:

A) $254,137
B) $246,630
C) $254,301
D) $209,149

Question 50

Alpha Manufacturing Corporation has two service departments,Custodial Services and Maintenance,and three production departments,Cutting,Milling,and Assembly.The company allocates the cost of Custodial Services on the basis of square footage and Maintenance on the basis of labor-hours.No distinction is made between variable and fixed costs.Budgeted operating data for the year just completed follow:
Required:
a.Prepare a schedule to allocate service department costs to the production departments by the direct method.
b.Prepare a schedule to allocate service department costs to the production departments by the step-down method,allocating Custodial Services first.

Question 51

(Appendix 4B) The Thomas Corporation has two service departments and two operating departments. The following data are available for a recent period:
Thomas allocates service department costs by the step-down method in the following order: Administrative Department costs are allocated first, based on number of employees; Custodial Department costs are allocated second, based on square feet occupied. No distinction is made between fixed and variable costs.
After all allocations,the total amount of overhead cost contained in the Assembly Department will be:

A) $152,333
B) $168,550
C) $150,200
D) $155,700

Question 52

Vercher Natal Clinic uses the step-down method to allocate service department costs to operating departments.The clinic has two service departments,Administration and Information Technology (IT),and two operating departments,Prenatal Care and Postnatal Care.
Administration Department costs are allocated first on the basis of employees and IT Department costs are allocated second on the basis of computers.
Required:
Allocate the service department costs to the operating departments using the step-down method.

Question 53

Catoire Consultancy uses the direct method to allocate its service department costs to its operating departments.The company has two service departments,Information Technology and Administration,and two operating departments,Corporate Practice and Government Practice.Data concerning those departments follow:
Information Technology Department costs are allocated on the basis of computers and Administration Department costs are allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.

Question 54

The direct method is used by Kurpinski Clinic to allocate its service department costs to its operating departments.Data concerning those departments follow:
Information Technology costs are allocated on the basis of computers and Personnel costs are allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.

Question 55

(Appendix 4B) Blondell Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow:
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
In the first step of the allocation,the amount of Personnel Department cost allocated to the Family Law Department is closest to:

A) $32,248
B) $70,252
C) $36,336
D) $33,396

Question 56

Spivey Corporation has two service departments and two operating departments.Budgeted costs and budgeted activity in the various departments for the current year are shown below:
The company uses the step-down method to allocate service department costs to operating departments.The costs of Service Department A are allocated first on the basis of square feet of space occupied.The costs of Service Department B are then allocated on the basis of number of employees in other departments.Predetermined overhead rates in the operating departments are based on machine hours.
Required:
a.Prepare a schedule showing the allocation of service department costs to other departments.
b.Compute the predetermined overhead rate for each operating department.

Question 57

City Medical Clinic has two service departments,Building Services and Energy,and three operating departments,Pediatrics,Geriatrics,and Surgery.The clinic allocates the cost of Building Services on the basis of square footage and Energy on the basis of patient days.No distinction is made between variable and fixed costs.Budgeted operating data for the year just completed follow:
Required:
a.Prepare a schedule to allocate service department costs to operating departments by the direct method (round all dollar amounts to the nearest whole dollar).
b.Prepare a schedule to allocate service department costs to operating departments by the step-down method,allocating Building Services first (round all amounts to the nearest whole dollar).

Question 58

(Appendix 4B) Strzelecki Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. Data concerning those departments follow:
Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B.
The total Operating Department Y cost after allocations is closest to:

A) $320,486
B) $318,473
C) $320,260
D) $307,660

Question 59

(Appendix 4B) The Thomas Corporation has two service departments and two operating departments. The following data are available for a recent period:
Thomas allocates service department costs by the step-down method in the following order: Administrative Department costs are allocated first, based on number of employees; Custodial Department costs are allocated second, based on square feet occupied. No distinction is made between fixed and variable costs.
After the allocations,the total amount of overhead cost contained in the Finishing Department will be:

A) $156,800
B) $151,300
C) $154,667
D) $138,450

Question 60

Sandven Corporation uses the direct method to allocate its two service department costs to its two operating departments.Data concerning those departments follow:
Service Department A costs are allocated on the basis of allocation base A and Service Department B costs are allocated on the basis of allocation base B.
Required:
Allocate the service department costs to the operating departments using the direct method.