Question

Interdepartment Services: Step Method

O'Brian's Department Stores allocates the costs of the Personnel and Payroll departments to three retail sales departments, Housewares, 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:

	Personnel	Payroll	Housewares	Clothing	Furniture
Direct department cost	$7,300	$3,800	$12,300	$20,000	$15,650
Number of employees	5	2	8	14	3
Gross payroll	$6,100	$2,800	$10,800	$17,200	$8,500

(a) Determine the percentage of total Personnel Department services that was provided to the Payroll Department. (Round your answer to one decimal place.)

(b) Determine the percentage of total Payroll Department services that was provided to the Personnel Department. (Round your answer to one decimal place.)

(c) Prepare a schedule showing Personnel Department and Payroll Department cost allocations to the operating departments, assuming O'Brian's uses the step method.

For each department below, enter the total costs calculated from your schedule. Do not round until your final answers. Round answers to the nearest dollar.

Service Departments Producing Departments

Payroll Personnel Housewares Clothing Furniture

Total costs $ $ $ $ $

Answer 1

a)
Personal deptt services to Payroll deptt:
2 *100/ (5+2+8+14+3)			6.25
b)
Payroll deptt services to Personal deptt:
6100 *100/ 45400		13.44
c)
	Personal	payroll	Houseware	clothing	Furniture
Costs	7300	3800	12300	20000	15650
Allocation:
Personal	-7300	541	2163	3785	811
total	0	4341	14463	23785	16461
Payroll		-4341	1284	2046	1011
Total cost		0	15747	25831	17472