Allegiance Corporation Has Two Service Departments (S1 and S2) and Two

question 77

Essay

Allegiance Corporation has two service departments (S1 and S2) and two production departments (P1 and P2). S1 and S2 both use the number of employees as an allocation base. The following data are available:

Required:
A. Assuming use of the direct method:
1. Over how many employees would S1's budgeted cost be allocated?
2. How much of S2's cost would be allocated to P1?
3. How much of P1's cost would be allocated to S1?
B. Assuming use of the step-down method:
1. How much of S1's cost would be allocated to S2? Allegiance allocates S1's costs prior to allocating those of S2.
2. How much of S2's total cost would be allocated to P2?
3. How much of S2's total cost would be allocated to S1?

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Definitions:

Natural Monopoly

A market condition where due to high fixed costs or unique resources, one firm can supply the entire market more efficiently than if there were multiple firms.

Total Demand

Total demand represents the entire quantity of a particular good or service that all consumers in a market are willing to purchase at various price points over a specific time frame.

Exclusive Right

A legal authorization to be the sole provider or producer of a particular product or service, or to use a specific piece of intellectual property.

Cable Television

A system of delivering television programming to paying subscribers via radio frequency (RF) signals transmitted through coaxial cables.