Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / A Company has two service departments
A Company has two service departments. Maintenance and IT. Maintenance Department costs of $320,000 cre allocated on the basis of budgeted maintenance orders. It Department costs of 5480.000 cre alocated based on the number of hour. The conts of operating departments X and Y are $160.000 and $240.000, respectively. Data on budou maintenance orders and number of hours are as follows: of Support Departments Produchon Departments Maintenance IT ? Y Department Department $320,000 $480,000 $160.000 $240.000 Budgeted costs Budgeted maintenance orders NA 40 18 32 Number of hours 200 NA 800 2400 Using the step down method, what amount of Maintenance Department cost will be allocated to Department of the service department with the highest percentage of interdepartmental support service is allocated first? Select one: O a. $ 128,000 Ob $85,333 O c. $ 225,882 Od $240.000
Answer : B - $85,333
Explanation:
method to be followed: Step Down
First maintainance department cost will be allocated to all other departments on the basis of Budgeted maintainance hours.
This is because maintainance costs has the highest cost and highest percentage of service costs
total budgeted maintainace hours= 40+48+32= 120 maintainance hours
maintainance hours used by Department Y= 32 hours
Answer :
Maintainance cost to be allocated to department = $320,000*32/120= $85,333
