Question

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:
   

User of Service	Provider of Service
		HR		Computing
HR		0		10	%
Computing		10	%	0
Deposit		60	%	50	%
Loan		30	%	40	%

  
The budgeted costs in the two service departments for the year are as follows:

HR	$	569,000
Computing		798,500

  
Required:
Use the reciprocal-services method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. (Do not round your intermediate calculations and round final answers to the nearest dollar amount.)

Answer 1

Answer:

	Deposit	Loan
HR department	$      393,242	$      196,621
Computing department	$      432,020	$      345,616

Calculations:

It is given that:

	Deposit	Loan	HR department	Computing department	Total
HR department	60	30	0	10	100
Computing department	50	40	10	0	100

Now,

Let the total cost of	HR department	be x.
Let the total cost of	Computing department	be y.

and,

So, x = 569000 + 0.1y	---------Equation 1
y = 798500 + 0.1x	---------Equation 2

and,

Solving Equation 1 and 2:

Substitute value of 'y' from equation 2 in Equation 1-

So, x = 569000 + 0.1 (798500 + 0.1x)

So, x = $ 655404.04

The total cost of HR department is $ 655404.04

and,

Putting the value of x in equation 2-

So, y = 798500 + 0.1 * 655404.04

So, y = $ 864040.40

The total cost of Computing department is $ 864040.40

and,

	Deposit	Loan	HR department	Computing department
Total cost	$                 -	$                 -	$          569,000	$                        798,500
HR department	$      393,242	$      196,621	$        (655,404)	$                          65,540
Total cost	$      393,242	$      196,621	$          (86,404)	$                        864,040
Computing department	$      432,020	$      345,616	$            86,404	$                       (864,040)
Total cost	$      825,263	$      542,237	$                    -	$                                   -

In case of any doubt or clarification, feel free to come back via comments.