Exercise 6-5. choice of allocation base (cost driver) for service departments [lo 1] auburn banking and loan company has six service departments: 1. human resources (hires employees and manages benefits) 2. duplicating (performs copy services) 3. janitorial (provides routine cleaning services) 4. accounting (provides accounting services) 5. graphic design (designs forms) 6. food services (provides free breakfast and lunch to employees) the services are used by the company’s two subsidiaries, auburn personal banking and auburn business banking. required a. suggest allocation bases to be used in allocating the service department costs to the two subsidiaries. b. food services are used by employees in the human resources department. would a share of food service costs be allocated to human resources under the direct method of allocation?

Clonex labs, inc., uses the weighted-average method in its process costing system. the following data are available for one department for october: percent completed units materials conversion work in process, october 1 53,000 90 % 65 % work in process, october 31 29,000 74 % 52 % the department started 381,000 units into production during the month and transferred 405,000 completed units to the next department. required: compute the equivalent units of production for october.

Chance company had two operating divisions, one manufacturing farm equipment and the other office supplies. both divisions are considered separate components as defined by generally accepted accounting principles. the farm equipment component had been unprofitable, and on september 1, 2018, the company adopted a plan to sell the assets of the division. the actual sale was completed on december 15, 2018, at a price of $600,000. the book value of the division’s assets was $1,000,000, resulting in a before-tax loss of $400,000 on the sale. the division incurred a before-tax operating loss from operations of $130,000 from the beginning of the year through december 15. the income tax rate is 40%. chance’s after-tax income from its continuing operations is $350,000. required: prepare an income statement for 2018 beginning with income from continuing operations. include appropriate eps disclosures assuming that 100,000 shares of common stock were outstanding throughout the year. (amounts to be deducted should be indicated with a minus sign. round eps answers to 2 decimal places.)

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