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Problem 1

The All Souls Hospital has three service departments (NursingSupport, Maintenance and Administration) and two operatingdepartments (Inpatient and Outpatient.) Selected data from a recentperiod on the five departments follows.

	ServiceDepartments			Operating Departments
	Nursing Support	Maintenance	Administration	Inpatient	Outpatient	Total
Direct Costs	$140,000	$105,000	$48,000	$275,000	$430,000	$998,000
Number of Employees	60	35	140	315	210	760
Square Feet of Space Occupied	15,000	10,000	20,000	40,000	100,000	185,000
Patient Hours				30,000	60,000	90,000

Hospital Administrators use the following for costallocation:

Allocates Nursing Support based upon Number of Employees

Allocates Maintenance based upon Square Feet of SpaceOccupied

Allocates Administration based upon Patient Hours

Complete the following:

Use the step method to allocate the service department costs tothe operating departments based upon the information above anddetermine the new costs for Inpatient and Outpatient. Use thefollowing order: Nursing Support, Maintenance, Administration.

Use the direct method to allocate the service department coststo the operating departments.

Problem 2

Betty's Beauty Supply Company purchases a Cremex which is thenprocessed to yield three moisturizing lotions: Angelic Crème,Ageless Crème and Antique Crème. In February, Betty purchased10,000 gallons of Cremex at a cost of $250,000, and the companyincurred $100,000 of additional joint conversion costs. June salesand production information are as follows:

	GallonsProduced	Sales Price atSplit-off	Further ProcessingCost per Gallon	Final SalesPrice
Angelic Crème	2,000	$55	$0	$55
Ageless Crème	3,000	$40	$0	$40
Antique Crème	5,000	$30	$5	$60

Angelic and Ageless can be sold to other beauty supply stores atthe split-off point. Antique can be sold at the split-off point orprocessed further and packaged for sale as an asthma medication.Allocate the $350,000 of joint cost to the three lotions using:

Physical units method

Sales value at split off method

NRV method

Constant gross margin method

	Physical Units Method	Sales Value at Split OffMethod	NRV Method	Constant Gross Margin Method
Angelic Crème
Ageless Crème
Antique Crème