Jack Donaldson Owns and Operates Jack's Abstracting Service Required:
Use the Direct Method to Allocate the Service Department

question 34

Essay

Jack Donaldson owns and operates Jack's Abstracting Service.Jack's two revenue generating operations (Abstracting Services and Closing Services)are supported by two service departments: Clerical and Custodial.Costs in the service departments are allocated in the following order using the designated allocation bases.Clerical: number of transactions processed.Custodial: square footage of space occupied.Average and expected activity levels for next month are as follows: $\begin{array}{|l|r|r|r|}\hline & \begin{array}{r}\text { Numbers of } \\\text { Transactions }\end{array} & \begin{array}{r}\text { Square } \\\text { Fodage }\end{array} & \begin{array}{r}\text { Expected } \\\text { Costs }\end{array} \\\hline \text { Abstract services } & 50 & 1,800 & \\\hline \text { Closing services } & 25 & 2,200 & \\\hline \text { Clerical } & & 1,600 & \$ 40,000 \\\hline \text { Custodial } & 5 & & 10,000 \\\hline\end{array}$
Required:
Use the direct method to allocate the service department costs to the revenue generating departments.Provide the total costs for the revenue departments.

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Definitions:

Checks and Balances

A system in government where each branch has the power to check or limit the actions of the other branches to prevent any single branch from becoming too powerful.

Constitution

The fundamental set of laws and principles that outlines the governance structure, rights, and duties within a state or organization.

Necessary and Proper Clause

A clause in the U.S. Constitution granting Congress the power to pass all laws required and appropriate for executing its declared powers.

Spending Power

The authority of a government to allocate its resources by making expenditures to achieve economic or social objectives.