Question

Lewis Corporation has two service departments: Data Processing and Administration/Personnel. The company also has three divisions: X, Y, and Z. Data Processing costs are allocated based on hours of use and Administration/Personnel costs are allocated based on number of employees. Department Direct Costs Employees Hours of use Administration/ Personnel $400,000 10 3,300 Data Processing 850,000 5 1,100 X 450,000 30 1,800 Y 300,000 15 2,200 Z 550,000 25 4,500 Assume that Data Processing provides more service than Administration/Personnel. Refer to Lewis Corporation. Assume that Data Processing costs have been allocated and the balance in Administration is $600,000. Using the step method, what amount is allocated to Y

Answer 1

Lewis Corporation

Using the step method, the amount allocated to Y is:

Y = $128,571

Step-by-step explanation:

a) Data and Calculations:

Department Direct Costs Employees Hours of use

Administration/

Personnel $400,000 10 3,300

Data Processing 850,000 5 1,100

X 450,000 30 1,800

Y 300,000 15 2,200

Z 550,000 25 4,500

Allocation of Administration/

Personnel cost of $600,000:

X = $257,143 (600,000 * 30/70)

Y = $128,571 (600,000 * 15/70)

Z = $214,286 (600,000 * 25/70)