Question

Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the Computing Department. The bank has two other departments that directly service customers, the Deposit Department and the Loan Department. The usage of the two service departments’ output for the year is as follows:

The user of Service	Provider of Service
	HR			Computing
HR	—			15	%
Computing	10	%		—
Deposit	60	%		50	%
Loan	30	%		35	%

The budgeted costs in the two service departments for the year are as follows:

HR	$	153,000
Computing		229,500

Required:
Use the step-down method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. Tuscaloosa National Bank allocates the costs of the HR Department first. (Do not round intermediate calculations.)

	Deposit	Loan
Allocation of HR Department costs
Allocation of Computing Department costs
Total costs allocated to each department

Answer 1

Use the step-down method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. Tuscaloosa National Bank allocates the costs of the HR Department first

	Deposit	Loan
Allocation of HR Department costs	153000*60% = 91800	153000*30% = 45900
Allocation of Computing Department costs (229500+153000*10%)	244800*50/85 = 144000	244800*35/85 = 100800
Total costs allocated to each department	235800	146700