Jack Donaldson Owns and Operates Jack's Abstracting Service Required:
A

question 98

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: $\begin{array}{|l|r|r|r|}\hline & \begin{array}{r}\text { Number of } \\\text { Transactions }\end{array} & \begin{array}{r}\text { Square } \\\text { Fodage }\end{array} & \begin{array}{r}\text { Expected } \\\text { Costs }\end{array} \\\hline \text { Abstract services } & 50 & 1,800 & \\\hline \text { Closing services } & 25 & 2,200 & \\\hline \text { Clerical } & & 1,600 & \$ 40,000 \\\hline \text { Custodial } & 5 & & 10,000 \\\hline\end{array}$
Required:
a.Use the step method to allocate the service department costs to the revenue generating departments.Assume Clerical costs are allocated before Custodial costs and round all calculations to the nearest whole dollar.Provide the total costs for the revenue departments.b.Use the step method to allocate the service department costs to the revenue generating departments but now assume Custodial costs are allocated before Clerical costs.Provide the total costs for the revenue departments.

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Definitions:

Marginal Tax Rate

The tax rate applied to the next dollar of income, indicating how much tax will be paid on an additional dollar of earnings.

Proportional

Pertaining to a relationship or situation where two quantities vary directly with each other.

Taxable Income

The amount of income that is subject to taxation, after all allowable deductions, credits, and exemptions.

Total Income

The sum of all earnings received by an individual or entity, encompassing wages, salaries, profits, rents, and other forms of earnings.