Westmore Company Has Two Service Departments and Two Operating Departments

question 64

Multiple Choice

Westmore Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Building \& } \\\text { Grounds }\end{array} & \text { Personnel } & \text { Operating A} & \text { Operating B } \\\hline \text { Departmental costs } & \$ 54,000 & \$ 200,000 & \$ 650,000 & \$ 800,000 \\\hline \text { Square Metres Occupied } & 1,000 & 3,000 & 12,000 & 15,000 \\\hline \text { Number of Employees } & 10 & 5 & 45 & 55 \\\hline \text { Direct Labour Hours } & & & 76,000 & 92,000 \\\hline\end{array}$ The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of direct labour hours.



- Assume that the company uses the step-down method of allocating Service Department costs to Operating Departments,and Building and Grounds costs are allocated first.How much Personnel Department cost would be allocated to Operating Department A?

• A) $0.
• B) $90,000.
• C) $92,430.
• D) $205,400.

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Definitions:

Settlement Or Curtailment

Events that significantly reduce or eliminate the obligations or service period of a pension plan or other long-term benefits, requiring special accounting treatment.

Government Funding

Financial support provided by a governmental body to individuals, organizations, or projects deemed beneficial or necessary for the public or specific sectors.

Pension Costs

Expenses related to providing retirement benefits to employees, including contributions to pension plans and costs associated with pension plan management.

Postretirement Benefits

Benefits, such as healthcare and life insurance, provided by employers to their employees after they retire.