The Direct Method Is Used by Kurpinski Clinic to Allocate

question 37

Essay

The direct method is used by Kurpinski Clinic to allocate its service department costs to its operating departments.Data concerning those departments follow:
Information Technology costs are allocated on the basis of computers and Personnel costs are allocated on the basis of employees.
Required:
Allocate the service department costs to the operating departments using the direct method.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue is available to cover fixed costs and generate profit.

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as materials and labor.

Cost of Goods Sold

The total cost directly associated with producing the goods sold by a business during a specific period, including labor, materials, and manufacturing overhead.

Product Costs

The costs directly associated with producing goods, including direct materials, direct labor, and manufacturing overhead.