Problem 11-57 Allocate Service Department Costs: Ethical Issues (LO 11-2, 3,4) [
ID: 2551571 • Letter: P
Question
Problem 11-57 Allocate Service Department Costs: Ethical Issues (LO 11-2, 3,4) [The following information applies to the questions displayed below] Fifth Street Publishing (FSP) was founded many years ago as a printing cooperative offering printing services to members Most members were charitable and religious organizations. Ten years ago, FSP became a for-profit corporation, although it retained its commitment to the original member groups. It has two production departments, Member and Commercial. The Member Department handles printing jobs for nonprofit groups and Commercial serves the remaining customers. FSP is organized this way to facilitate its billing: FSP charges nonprofit customers a price equal to the full cost of the job, including allocated overhead; commercial jobs are priced based on what the market will bear. FSP has two service departments Accounting and Computer Services (CS). Accounting costs are allocated based on number of employees, and CS costs are allocated based on computer time (hours). Selected percentage use data follow: Using Department Computer Supplying Department Accounting (employees) Computer Services (hours) Direct cost Accounting Services Member Commercial 0% 40 30% 0 10% 10 60% 50 $9,000 $40,000 $110,000 $380,000Explanation / Answer
b. No
c. 1 and 4
d.
e.
Computer Service Accounting Member Department Commercial Department Before Allocation 40000 9000 Computer Service -40000 16000 4000 20000 Accounting -25000 3571 21429 (25000*10/(10+60) (25000*60/(10+60) Total 0 0 7571 41429