Answer:
a.
Direct Method
Administration Accounting Domestic International
Employees - 27 55 18
Transactions 37,000 - 20,000 80,000
Direct costs $356,000 $149,000 $955,000 $3,650,000
Allocation
Admin. cost -$356,000 $268,219 $87,781
Accounting Cost $149,000 $29,800 $119,200
Total $0 $0 $1,253,019 $3,856,981
b.
Step Method
Administration Accounting Domestic International
Employees - 27 55 18
Transactions 37,000 - 20,000 80,000
Direct costs $356,000 $149,000 $955,000 $3,650,000
Allocation
Admin. cost -$356,000 $160,200 $89,000 $106,800
Total $0 $309,200 $1,044,000 $3,756,800
Accounting $0 -$309,200 $61,840 $247,360
Total $0 $0 $1,105,840 $4,004,160
Step-by-step explanation:
a.
Admin cost will be allocated on the basis of Number of employee in each operating department.
Administrative Cost = $356,000 / (55 + 18) = $4,876.71 per employee
Domestic = 55 x $4,876.71 = $268,219
International = 18 x $4,876.71 = $87,781
Accounting cost will be allocated on the basis of Number of transactions in each operating department.
Accounting Cost = $149,000 / (20,000 + 80,000) = $1.49 per transaction
Domestic = 20,000 x $1.49 = $29,800
International = 80,000 x $1.49 = $119,200
b.
Administrative cost
Total Employees = 27 + 15 + 18 = 60 employees
Admin cost will be allocated on the basis of Number of employee in each operating department.
Accounting = $356,000 x 27/60 = $160,200
Domestic = $356,000 x 15/60 = $89,000
International =$356,000 x 18/60 = $106,800
Accounting cost will be allocated on the basis of Number of transactions in each operating department.
Domestic = $309,200 x 20,000 / 100,000 = $61,840
International = $309,200 x 80,000 / 100,000= $247,360