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

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:
$$\begin{array} { l r r r } & \begin{array} { c } \text { Number of } \\\text { Tramsactions }\end{array} & \begin{array} { c } \text { Square } \\\text { Footage }\end{array} & \begin{array} { c } \text { Expected } \\\text { Costs }\end{array} \\\text { Abstract services } & 50 & 1,800 & \\\text { Closing services } & 25 & 2,200 & \\\text { Clerical } & & 1,600 & \$ 40,000 \\\text { Custodial } & 5 & & 10,000\end{array}$$
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.

Correct Answer:

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a. Abstract: $30,625...

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