Wellston Medical Clinic has two service departments: Building Operations and Utilities, and three operating departments: Rehabilitation, Preventative Medicine, and Geriatrics. Wellston Medical Clinic allocates the cost of Building Operations on the basis of square footage and Utilities on the basis of patient days. Fixed and variable costs are not separated. Budgeted operating data for the previous year are presented below:
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Service
Building
Operations
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Departments
Utilities
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Operating
Rehabilitation
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Departments
Preventative
Medicine
|
Geriatrics
|
|
Budgeted costs before allocation
|
$20,000
|
$10,000
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$90,000
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$60,000
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$100,000
|
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Square Footage
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1,000
|
4,000
|
6,000
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18,000
|
12,000
|
|
Patient Days
|
-
|
-
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5,500
|
7,700
|
8,800
|
Required: (round all dollar amounts to the nearest whole dollar)
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a.
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Allocate service department costs to operating departments by the direct method. Calculate the total budgeted cost for each of the operating departments.
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b.
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Allocate service department costs to operating departments by the step method, allocating Building Operations first. Calculate the total budgeted cost for each of the operating departments.
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