Arbon Company has three service departments and two operating departments. Selected data concerning the five departments...

Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented below:

	Service Departments						Operating Departments

	Administrative		Janitorial		Equipment Maintenance		Prep		Finishing		Total
Costs	$	92,000	$	67,800	$	36,000	$	256,100	$	498,600	$	950,500
Number of employees		80		60		240		600		300		1,280
Square metres of space occupied		300		1,200		1,000		2,000		7,000		11,500
Machine-hours								26,000		54,000		80,000

The company allocates service department costs by the step-down method in the following order: Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine-hours).

Required:
Using the step-down method, allocate the service department costs to the operating departments. (Negative amounts should be indicated by a minus sign.)

Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented below:

	Service Departments						Operating Departments

	Administrative		Janitorial		Equipment Maintenance		Prep		Finishing		Total
Costs	$	92,000	$	67,800	$	36,000	$	256,100	$	498,600	$	950,500
Number of employees		80		60		240		600		300		1,280
Square metres of space occupied		300		1,200		1,000		2,000		7,000		11,500
Machine-hours								26,000		54,000		80,000

Required:
Using the step-down method, allocate the service department costs to the operating departments. (Negative amounts should be indicated by a minus sign.)

	Service Departments			Operating Departments
	Administrative	Janitorial	Maintenance	Prep	Finishing	Total
Departmental costs before allocations
Allocations:
Administrative
Janitorial
Maintenance
Total costs after allocation

Solutions

Expert Solution

Requirement asked

	Service Departments			Operating Departments
	Administrative	Janitorial	Maintenance	Prep	Finishing	Total
Departmental costs before allocations	$92,000	$67,800	$36,000	$256,100	$498,600	$950,500
*Allocations:*
Administrative (60+ 240 + 600 + 300= 1200)	($92,000)	$4,600	$18,400	$46,000	$23,000	$0
Janitorial (1000 + 2000 + 7000 = 10000)		($72,400)	$7,240	$14,480	$50,680	$0
Maintenance (26000 + 54000 = 80000)			($61,640)	$20,033	$41,607	$0
Total costs after allocation	$0	$0	$0	$336,613	$613,887	$950,500

--Working

	Service Departments			Operating Departments
	Administrative	Janitorial	Maintenance	Prep	Finishing
Departmental costs before allocations	92000	67800	36000	256100	498600
*Allocations:*
Administrative (60+ 240 + 600 + 300= 1200)	-92000	=92000*60/1200	=92000*240/1200	=92000*600/1200	=92000*300/1200
Janitorial (1000 + 2000 + 7000 = 10000)		=-67800-4600	=72400*1000/10000	=72400*2000/10000	=72400*7000/10000
Maintenance (26000 + 54000 = 80000)			=-36000-18400-7240	=61640*26000/80000	=61640*54000/80000

ekkarill92 answered 1 year ago

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