BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows. AdministrationAccounting domestic International Employees –21 36 43 Transactions 32,000– 21,000 84,000 Department direct costs 360,000140,000$935,000 $3,730,000 Required:a. Allocate the cost of the service departments to the operating departments using the direct method.b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.c. Allocate the cost of the service departments to the operating departments using the reciprocal method.

Solution: Introduction: There are three common methods to allot or distribute the service costs to…

Answered: BluStar Company has two service…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter5: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 1CMA

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BluStar Company has two service departments, Administration and Accounting, and two operating departments, Domestic and International. Administration costs are allocated on the basis of employees, and Accounting costs are allocated on the basis of number of transactions. A summary of BluStar operations follows.

	Administration	Accounting		domestic		International
Employees	–	21		36		43
Transactions	32,000	–		21,000		84,000
Department direct costs	360,000	140,000	$	935,000	$	3,730,000

Required:

a. Allocate the cost of the service departments to the operating departments using the direct method.
b. Allocate the cost of the service departments to the operating departments using the step method. Start with Administration.
c. Allocate the cost of the service departments to the operating departments using the reciprocal method.

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