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Zachary Trust Corporation has two service departments: actuary and economic analysis. Zachary also has three operating...

Zachary Trust Corporation has two service departments: actuary and economic analysis. Zachary also has three operating departments: annuity, fund management, and employee benefit services. The annual costs of operating the service departments are $668,200 for actuary and $1,002,300 for economic analysis. Zachary uses the direct method to allocate service center costs to operating departments. Other relevant data follow.

Operating Costs* Revenue
Annuity $ 690,000 $ 681,000
Fund management 1,090,000 1,380,000
Employee benefit services 790,000 1,280,000

*The operating costs are measured before allocating service center costs.


Required

  1. Use operating costs as the cost driver for allocating service center costs to operating departments.

  2. Use revenue as the cost driver for allocating service center costs to operating departments.

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