Quintano Corporation has two service departments Administration and Human Resources that
provide services to each other and to departments Advertising and Circulation. Quintano has
decided to allocate the service department costs using the following allocation bases: Human
Resources based on number of employees; Administration based on the dollar amount of assets
employed. The total costs for the departments are as follows: Administration, $400,000; Human
Resources, $275,000; Advertising, $490,000; and Circulation, $700,000.
QUINTANO CORPORATION
DATA RELATING TO SERVICE DEPARTMENTS AND REVENUE DEPARTMENTS
Usage of Service Department Costs
Service Departments
Revenue Departments
Administration Human Resources Advertising Circulation
Allocation Base
Number of employees
Assets employed
5
4
6
10
$ 200,000 $
150,000 $
400,000 $
950,000
REQUIRED: Using the attached forms, allocate the service department costs for the service
departments Administration and Human Resources using the following methods.
Round all calculations for percentages or allocation rates to six decimal places and
all dollar calculations to the nearest whole dollar.
(1) Direct method.
(2) Step method, allocating the costs in order of services provided to other
service departments from greatest to least.
(3) Reciprocal (simultaneous solution) method.
QUINTANO CORPORATION
ALLOCATION OF SERVICE DEPARTMENT COSTS
DIRECT METHOD
Administration Human Resources Advertising Circulation
Direct Costs of Department
$ 400,000 $
275,000 $
490,000 $
700,0
Allocate Administration
(
400,000)
Allocate Human Resources
(
275,000)
Totals
$
0 $
0
Calculation of Allocation Rates:
Total Costs to Allocate
Total Allocation Base
Allocation Rate
