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Question - O'Brian's Department Stores allocates the costs of the Personnel and Payroll departments to three retail sales departments, House wares, Clothing, and Furniture. In addition to providing services to the operating departments, Personnel and Payroll provide services to each other. O'Brian's allocates Personnel Department costs on the basis of the number of employees and Payroll Department costs on the basis of gross payroll. Cost and allocation information for June is as follows:
Direct department cost
$ 7,800
$ 3,200
$ 12,200
$ 20,000
$ 16,750
Number of employees
5
4
8
16
Gross payroll
$ 6,000
$ 3,300
$ 10,600
$ 17,400
$ 8,100
(a) Determine the percentage of total Personnel Department services that was provided to the Payroll Department.
(b) Determine the percentage of total Payroll Department services that was provided to the Personnel Department.
(c) Prepare a schedule showing Personnel Department and Payroll Department cost allocations to the operating departments, assuming O'Brian's uses the step method.
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