Solution-Allocate the service department costs

Allocate the service department costs

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Reference no: EM133069043

Question - Eidaudi Inc. is organized into two major sales divisions: Institutional clients and Retail clients. Eidaudi Inc. also has two service departments: Finance and Administration. The Finance department's costs are allocated to the other departments based on a log of the hours spent on tasks for each user. The Administration department's costs are allocated to users based on the number of employees in each department.

The following information is available for the most recent period:

	Finance	Administration	Institutional	Retail
Overhead costs	$450,000	$200,000	$700,000	$1,000,000
Research hours	50	250	600	800
Number of employees	12	15	20	30

Required -

a) Allocate the service department costs to the Institutional and Retail divisions using the direct method.

b) Assume that the step method is used and the Finance department is the first one to be allocated. Allocate the service department costs to the Institutional and Retail divisions.

c) Assume that the reciprocal method is used. Write the reciprocal cost equations. (Do NOT solve the equations.)

Reference no: EM133069043

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Allocate the service department costs

Reference no: EM133069043

Reference no: EM133069043

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