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Problem 4-26A (Algo) Allocating service center costs-step method and direct method LO 4-6 Walton Information Services, Inc., has two service departments: human resources and billing. Walton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Legal Services Human Billing 50 Resources Health Care Retail Number of employees Annual cost* 20 207 157 86 $ 6,170,000 $10,700,000 $900,000 $2,110,000 $4,970,000 $5,350,000 $2,970,000 $3,950,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Walton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Walton adopts the direct method. The company uses the number of employees as the base for allocating the human resources department costs and department annual revenue as the base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method.

Problem 4-26A (Algo) Allocating service center costs-step method and direct method LO 4-6 Walton Information Services, Inc., has two service departments: human resources and billing. Walton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Legal Services Human Billing 50 Resources Health Care Retail Number of employees Annual cost* 20 207 157 86 $ 6,170,000 $10,700,000 $900,000 $2,110,000 $4,970,000 $5,350,000 $2,970,000 $3,950,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Walton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Walton adopts the direct method. The company uses the number of employees as the base for allocating the human resources department costs and department annual revenue as the base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter5: Support Department And Joint Cost Allocation
Section: Chapter Questions
Problem 1CMA
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Problem 4-26A (Algo) Allocating service center costs-step method and direct method LO 4-6 Walton Information Services, Ic., has two service departments: human resources and billing. Walton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Human Legal Resources Billing Health Care Retail Services Number of employees 20 50 207 157 86 $ 6,170,000 $10,700,000 Annual cost* $900,000 $2,110,000 $4,970,000 $5,350,000 $2,970,000 $3,950,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Walton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Walton adopts the direct method. The company uses the number of employees as the base for allocating the human resources department costs and department annual revenue as the base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method.
Transcribed Image Text:Problem 4-26A (Algo) Allocating service center costs-step method and direct method LO 4-6 Walton Information Services, Ic., has two service departments: human resources and billing. Walton's operating departments, organized according to the special industry each department serves, are health care, retail, and legal services. The billing department supports only the three operating departments, but the human resources department supports all operating departments and the billing department. Other relevant information follows. Human Legal Resources Billing Health Care Retail Services Number of employees 20 50 207 157 86 $ 6,170,000 $10,700,000 Annual cost* $900,000 $2,110,000 $4,970,000 $5,350,000 $2,970,000 $3,950,000 Annual revenue *This is the operating cost before allocating service department costs. Required a. Allocate service department costs to operating departments, assuming that Walton adopts the step method. The company uses the number of employees as the base for allocating human resources department costs and department annual revenue as the base for allocating the billing department costs. b. Allocate service department costs to operating departments, assuming that Walton adopts the direct method. The company uses the number of employees as the base for allocating the human resources department costs and department annual revenue as the base for allocating the billing department costs. c. Compute the total allocated cost of service centers for each operating department using each allocation method.
X Answer is not complete. Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 Req C1 Req C2 Allocate service department costs to operating departments, assuming that Walton adopts the step method. The company uses the department annual revenue as the base for allocating the billing department costs. (Round "Allocation rate" to 2 decimal places.) Weight of Base Allocation Department Allocated Cost Rate Health Care $ 2,000.00 $ 207 X= 2$ 414,000 Retail 2,000.00 157 X 314,000 %3D Legal Services 2,000.00 x x 86 X 172,000 = Total $ 900,000 < Req A1 Req B1 >
Transcribed Image Text:X Answer is not complete. Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B1 Req B2 Req C1 Req C2 Allocate service department costs to operating departments, assuming that Walton adopts the step method. The company uses the department annual revenue as the base for allocating the billing department costs. (Round "Allocation rate" to 2 decimal places.) Weight of Base Allocation Department Allocated Cost Rate Health Care $ 2,000.00 $ 207 X= 2$ 414,000 Retail 2,000.00 157 X 314,000 %3D Legal Services 2,000.00 x x 86 X 172,000 = Total $ 900,000 < Req A1 Req B1 >
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