Steven Parker Owns and Operates Steven's Septic Service and Legal

Steven Parker owns and operates Steven's Septic Service and Legal Advice. Steven's two revenue generating (production) operations are supported by two service departments: Clerical and Janitorial. Costs in the service departments are allocated in the following order using the designated allocation bases:
Clerical:
Variable cost: expected number of work orders processed
Fixed cost: long-run average number of work orders processed
Janitorial:
Variable cost: labor hours
Fixed cost: square footage of space occupied
Average and expected activity levels for next month (June) are as follows:
$\begin{array}{|l|r|r|r|r|}\hline &\text { No. of Work Orders } & \text {Averge } & \text { Labor Hours } & \text { Square Footage } \\&\text { Expected }\\\hline \text { Septic Service } & 50 & 80 & 560 & 1,800 \\\hline \text { Legal advice } & 25 & 20 & 840 & 2,200 \\\hline \text { Clerical } & 20 & 20 & 400 & 1,600 \\\hline \text { Janitorial } & 5 & 20 & 200 & 1,000 \\\hline\end{array}$
Expected costs in the service departments for June are as follows:
$$\begin{array} { l r r } & \text { Clerical } & \text { Janitorial } \\\text { Variable costs } & \$ 12,000 & \$ 4,200 \\\text { Fixed costs } & \$ 8,400 & \$ 800\end{array}$$
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Under the direct method of allocation, what is the total amount of service cost allocated to the Legal Advice operation for June? (Round all calculations to the nearest whole dollar.)

A) $6,231.
B) $7,720.
C) $8,640.
D) $9,330.

Correct Answer:

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