Question

In: Accounting

Exercise 17-17: Tuscaloosa National Bank has two service departments, the Human Resources (HR) Department and the...

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

Solutions

Expert Solution

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

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