Question

Problem 11-49 Comparison of Allocation Methods (LO 11-2, 3, 4)

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:  

Required: *Show Calculations

a.   Allocate the cost of the service departments to the operating departments using the direct method. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)

To

From

Administration

Accounting

Domestic

International

Department costs

Administration allocation

Accounting allocation

Totals

b.   Allocate the cost of the service departments to the operating departments using the step method. Start with Administration. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)

To

From

Administration

Accounting

Domestic

International

Department costs

Administration allocation

Accounting allocation

Total cost allocated

c. Allocate the cost of the service departments to the operating departments using the reciprocal method. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)

To

From

Administration

Accounting

Domestic

International

Department costs

Administration allocation

Accounting allocation

Total cost allocated

 

Administration

Accounting

Domestic

International

Employees

 

 

 

21

 

 

46

 

 

33

 

Transactions

 

37,000

 

 

 

 

21,000

 

 

84,000

 

Department direct costs

$

354,000

 

$

141,000

 

$

935,000

 

$

3,760,000

 

 

                         

 



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