Question

Exercise 17-17:

Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and
the Computing Department. The bank has two other departments that directly service customers, the
Deposit Department and the Loan Department. The usage of the two service departments’ output for the
year is as follows:
Provider of Service
User of Service HR Computing
HR ......................................................................................................................................................... — 15%
Computing ............................................................................................................................................ 10% —
Deposit ................................................................................................................................................. 60% 50%
Loan ...................................................................................................................................................... 30% 35%

The budgeted costs in the two service departments for the year are as follows:
HR ........................................................................................................................................................................... $153,000
Computing .............................................................................................................................................................. 229,500

Required: Use the direct method to allocate the budgeted costs of the HR and Computing departments
to the Deposit and Loan departments

Exercise 17–18
Step-Down Method of
Service Department Cost
Allocation; Bank
Refer to the data given in the preceding exercise.
Required: Use the step-down method to allocate the budgeted costs of the HR and Computing departments
to the Deposit and Loan departments. Tuscaloosa National Bank allocates the costs of the HR
Department first.

Please can you show all the work for 17-17 and 17-18. Please use Question 17-17 to answer 17-18

Thank you

Answer 1

Direct method to allocate the budgeted costs
Departments	HR Cost Allocation %	Computing Cost Allocation %	HR Cost Allocation (Amount $)	Computing Cost Allocation (Amount $)	Total Cost of Deparment (Amount$)
	A	B	C= 153000*A	D=229500*B	C+D
HR	0%	15%	-	34,425	34,425
Computing	10%	0%	15,300	-	15,300
Deposit	60%	50%	91,800	114,750	206,550
Loan	30%	35%	45,900	80,325	126,225
Total			153,000	229,500	382,500
Step-Down method to allocate the budgeted costs			Amount $
		HR	Computing	Deposit	Loan
Cost of Department	A	153,000	229,500	-	-
Cost allocation of HR Dept
% of Cost allocation of HR Dept	B	0%	10%	60%	30%
Cost allocation of HR Dept =($153000 * % of allocation)	C= 153000*B	(153,000)	15,300	91,800	45,900
Total	D=A+C	-	244,800	91,800	45,900
Cost allocation of Computing Dept
% of Cost allocation of HR Dept	E	15%	0%	50%	35%
Cost allocation of HR Dept = ($ 244800 * % of allocation)	F= 244800*E	36,720	(244,800)	122,400	85,680
Total	D+F	36,720	-	214,200	131,580