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Problem 4 Blondell Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow: Service Department Departmental costs Employees PCs Personnel $85,284 11 12 IT $29,703 25 26 Operating Department Family Corporate Law Law $883,360 $189,010 121 163 112 137 Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. Requirements Assuming the Personnel Department provides the greatest service; determine the costs in the operating departments by the step method of allocation. Assuming the Personnel Department provides the greatest service; determine the costs in the operating departments by the direct, step and reciprocal method of allocation. Direct Method Service Department Operating Department Personnel IT Family Law Corporate Law Total Service Department Operating Department Personnel IT Family Law Corporate Law Total Service Department Operating Department Personnel IT Family Law Corporate Law Total Total costs after allocation Step Method Total costs after allocation Reciprocal Method Total costs after allocation

Problem 4
Blondell Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow:
Service Department
Departmental costs
Employees
PCs

Personnel
$85,284
11
12

IT
$29,703
25
26

Operating Department
Family
Corporate
Law
Law
$883,360
$189,010
121
163
112
137

Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
Requirements
Assuming the Personnel Department provides the greatest service; determine the costs in the operating departments by the step method of allocation.
Assuming the Personnel Department provides the greatest service; determine the costs in the operating departments by the direct, step and reciprocal method of allocation.
Direct Method
Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Service Department Operating Department
Personnel
IT
Family Law Corporate Law

Total

Total costs after allocation
Step Method
Total costs after allocation
Reciprocal Method
Total costs after allocation

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