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In: Accounting

Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments...

Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs and service department usage ratios were recorded:

Supplying Department Using Department
Processing Administration Maintenance Branches Electronic
Processing 0 60 % 0 20 % 20 %
Administration 0 0 0 60 % 40 %
Maintenance 15 % 15 % 0 20 % 50 %
Direct cost $ 93,000 $ 630,000 $ 350,000 $ 5,300,000 $ 2,150,000

   

Required:

Allocate the service department costs to the two operating departments using the reciprocal method.

Solutions

Expert Solution

Requirement :

Allocated to:
Costs Processing Administration Branches Electronic
Maintenance (15:15:20:50) $      350,000 $      52,500 $           52,500 $         70,000 $      175,000
Processing (60:20:20) $      145,500 $           87,300 $         29,100 $         29,100
Administration (60:40) $      769,800 $      461,880 $      307,920
$      560,980 $      512,020

Working:

Total processing department costs:
Direct cost $         93,000
Share of cost in maintenance [350000*15%] $         52,500
$      145,500
Total Administrative department costs:
Direct cost $      630,000
Share of Processing [145500*60%] $         87,300
Share of Maintenance cost [350000*15%] $         52,500
$      769,800

ekkarill92 answered 6 months ago
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