Not-A-Mega Bank has three service departments (Administration, Communications, and Facilities), and two production departments (Deposits and Loans). A summary of costs and other data for each department prior to allocation of service department costs for the year ended December 31 follows:
| Administration | Communications | Facilities | Deposits | Loans | ||||||
| Direct costs | $280,000 | $470,000 | $406,400 | $14,310,000 | $9,800,000 | |||||
| Employee hours | 12,500 | 24,000 | 10,500 | 271,250 | 216,250 | |||||
| Number of employees | 6 | 11 | 4 | 140 | 80 | |||||
| Square footage occupied | 3,600 | 9,800 | 4,400 | 170,000 | 138,000 | |||||
| The costs of the service departments are allocated on the following bases: Administration, employee hours; Communications, number of employees; and Facilities, square footage occupied. (Do not round your intermediatecalculations. Round your answer to the nearest dollar amount.
A. Assume that Not-A-Mega Bank elects to distribute service department costs directly to production departments using the direct method. What amount of Communications Department costs is allocated to the Deposits Department?
B. Assume the same method of allocation as in part (a). What amount of Administration Department costs is allocated to the Loans Department?
C. Assuming that Not-A-Mega-Bank elects to distribute service department costs to other departments using the step method (starting with facilities & then Communications), what amount of Facilities Department costs is allocated to the Commnications Department? D. Assume the same method of allocation as in part (c). What amount of Communications Department costs is allocated to Facilities?
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A. Assume that Not-A-Mega Bank elects to distribute service department costs directly to production departments using the direct method. What amount of Communications Department costs is allocated to the Deposits Department?
Answer: $ 299091
Working notes for the above answer is as under
=470,000 *140 / (140+80)
= $ 299091
B. Assume the same method of allocation as in part (a). What amount of Administration Department costs is allocated to the Loans Department?
Answer: $ 124205
Working notes for the above answer is as under
=280,000 *216250 / (271250+216250)
= $ 124205
C. Assuming that Not-A-Mega-Bank elects to distribute service department costs to other departments using the step method (starting with facilities & then Communications), what amount of Facilities Department costs is allocated to the Commnications Department?
Answer: $ 12,392
Working notes for the above answer is as under
=406400 *9800 / (3800+9800+170000+138000)
=$ 12,392
D
Assume the same method of allocation as in part (c). What amount of Communications Department costs is allocated to Facilities?
Answer:
There is no allocation of costs back to the department after costs have been allocated from it. Facilities costs have already been allocated from it to other departments
