Catoire Consultancy uses the direct method to allocate its service department costs to its operating departments. The company has two service departments, Information Technology and Administration, and two operating departments, Corporate Practice and Government Practice. Data concerning those departments follow: Service Departments Operating Departments Information TechnologyAdministration Corporate PracticeGovernment PracticeDepartmental costs$26,244$21,696 $226,170$477,980Computers3914 5130Employees3210 7026 Information Technology Department costs are allocated on the basis of computers and Administration Department costs are allocated on the basis of employees. Required: Allocate the service department costs to the operating departments using the direct method.
What will be an ideal response?
Allocation base for Information Technology costs = 51 + 30 = 81
Allocation base for Administration costs = 70 + 26 = 96
| Service Departments | Operating Departments | |||||||
| Information Technology | Administration | Corporate Practice | Government Practice | |||||
| Departmental costs | $ | 26,244 | $ | 21,696 | $ | 226,170 | $ | 477,980 |
| Allocation: | ||||||||
| Information Technology (51/81, 30/81) | (26,244) | 16,524 | 9,720 | |||||
| Administration (70/96, 26/96) | (21,696) | 15,820 | 5,876 | |||||
| Total costs after allocation | $ | 0 | $ | 0 | $ | 258,514 | $ | 493,576 |
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