Steven Parker Owns and Operates Steven's Septic Service and Legal

question 151

Multiple Choice

Steven Parker owns and operates Steven's Septic Service and Legal Advice. Steven's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed.
Fixed cost: long-run average number of work orders processed.
Janitorial:
Variable cost: labor hours.
Fixed cost: square footage of space occupied.
Average and expected activity levels for next month (June) are as follows:
$\begin{array}{|l|r|r|r|r|}\hline &\text { No. of Work Orders } & \text {Averge } & \text { Labor Hours } & \text { Square Footage } \\&\text { Expected }\\\hline \text { Septic Service } & 50 & 80 & 560 & 1,800 \\\hline \text { Legal advice } & 25 & 20 & 840 & 2,200 \\\hline \text { Clerical } & 20 & 20 & 400 & 1,600 \\\hline \text { Janitorial } & 5 & 20 & 200 & 1,000 \\\hline\end{array}$
Expected costs in the service departments for June are as follows:
$$\begin{array} { l r r } & \text { Clerical } & \text { Janitorial } \\\text { Variable costs } & \$ 12,000 & \$ 4,200 \\\text { Fixed costs } & \$ 8,400 & \$ 800\end{array}$$
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Under the step method of allocation, how much Clerical Service cost should be allocated to the Septic Service operation for June? (Assume Clerical costs are allocated before Janitorial costs and round all calculations to the nearest whole dollar.)

• A) $12,689.
• B) $13,100.
• C) $13,620.
• D) $15,596.

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Definitions:

Exocrine Glands

Glands that secrete substances onto an epithelial surface by way of a duct, examples include sweat, salivary and digestive glands.

Hormones

Substances synthesized by bodily glands that control the functions of cells or organs.

Interstitial Fluid

A fluid that fills the spaces between cells in tissues, allowing for nutrient and waste exchange with the bloodstream.

Posterior Lobe

Often refers to the back portion of an organ or gland, such as the posterior lobe of the pituitary gland, which releases vital hormones.