Sandven Corporation uses the direct method to allocate its two service department costs to its two operating departments. Data concerning those departments follow: Service Department AService Department BOperating Department XOperating Department YDepartmental costs$34,300$66,230$161,710$503,220Allocation base A 5,000 1,000 32,000 17,000Allocation base B 8,000 2,000 32,000 5,000 Service Department A costs are allocated on the basis of allocation base A and Service Department B costs are allocated on the basis of allocation base B. Required:Allocate the service department costs to the operating departments using the direct method.
What will be an ideal response?
Allocation base for Service Department A costs = 32,000 + 17,000 = 39,000
Allocation base for Service Department B costs = 32,000 + 5,000 = 37,000
| Service Department A | Service Department B | Operating Department X | Operating Department Y | |||||
| Departmental costs | $ | 34,300 | $ | 66,230 | $ | 161,710 | $ | 503,220 |
| Allocation: | ||||||||
| Service Department A(32,000/39,000, 17,000/39,000) | (34,300) | 22,400 | 11,900 | |||||
| Service Department B (32,000/37,000, 5,000/37,000) | (66,230) | 57,280 | 8,950 | |||||
| Total costs after allocation | $ | 0 | $ | 0 | $ | 241,390 | $ | 524,070 |
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