Question

Steven's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Support Departments Production Departments Maintenance Personnel A BBudgeted costs $320,000 $80,000 $160,000 $240,000Budgeted maintenance-hours NA 800 960 640Number of employees 40 NA 160 480Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first?

Answer 1

Answer:

From maintenance to department B will be allocated 85,333 dollars

Explanation:

We distribute maintenance over personnel and operating and then,

we distributed the accumulated in personnel over the operating department:

$\left[\begin{array}{cccccc}&Maintenance&Personnel&Dep A&Deb B\\ maintenance-hours&&800&960&640\\ employes&&&160&480\\ Direct \: Cost&320,000&80,000&160,000&240,000\\ Allocate A&-320,000&106,667&128,000&85,333\\ Subtotal&&186,667&288,000&325,333\\ Allocate J&&-186,667&46,667&140,000\\ Total&&&334,667&465,333\\\end{array}\right]$

For the given question it would be:

total maintenance-hours: 800  + 960 + 640 = 2,400

allocation of maintenance:

320,000 x   640/2400 = 85,333