Blondell Legal Services, LLC, uses the step-down method to allocate service department

costs to operating departments. The firm has two service departments, Personnel and

Information Technology (IT), and two operating departments, Family Law and Corporate

Law. Data concerning those departments follow:

Service Department

Departmental costs

Employees

PCs

Personnel
$85,284
11
12

IT
$29,703
25
26

Operating Department
Family
Corporate
Law
Law
$883,360
$189,010
121
163
112
137

Personnel costs are allocated first on the basis of employees and IT costs are allocated
second on the basis of PCs.
Requirements
Assuming the Personnel Department provides the greatest service; determine the costs in
the operating departments by the step method of allocation.
Assuming the Personnel Department provides the greatest service; determine the costs in
the operating departments by the direct, step and reciprocal method of allocation.
Direct Method
Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Total costs after allocation
Step Method
Total costs after allocation
Reciprocal Method
Total costs after allocation

 

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Blondell Legal Services, LLC, uses the step-down method to allocate service department

costs to operating departments. The firm has two service departments, Personnel and

Information Technology (IT), and two operating departments, Family Law and Corporate

Law. Data concerning those departments follow:

Service Department

Departmental costs

Employees

PCs

Personnel
$85,284
11
12

IT
$29,703
25
26

Operating Department
Family
Corporate
Law
Law
$883,360
$189,010
121
163
112
137

Personnel costs are allocated first on the basis of employees and IT costs are allocated
second on the basis of PCs.
Requirements
Assuming the Personnel Department provides the greatest service; determine the costs in
the operating departments by the step method of allocation.
Assuming the Personnel Department provides the greatest service; determine the costs in
the operating departments by the direct, step and reciprocal method of allocation.
Direct Method
Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Total costs after allocation
Step Method
Total costs after allocation
Reciprocal Method
Total costs after allocation

 

Leave a Reply

Your email address will not be published. Required fields are marked *