Reference no: EM132574748

Question - BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.

Administration Accounting Domestic International

Employees - 25 40 35

Transactions 39,000 - 22,000 88,000

Department direct costs $362,000 $142,000 $935,000 $3,730,000

Required -

a. Allocate the cost of the service departments to the operating departments using the direct method.

b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.

c. Allocate the cost of the service departments to the operating departments using the reciprocal method.