The Danville Manufacturing Company has two service departments and two producing

Question

The Danville Manufacturing Company has two service departments and two producing departments. The following data are available for 2006. Service Dept. 1 Service Dept. 2 Producing 1 Producing 2 Department Costs $12,000 $8,000 $60,000 $70,000 Number of Transactions 6,000 4,000 6,000 14,000 Square Feet Occupied 2,000 1,000 4,000 6,000 The costs of service departments 1 and 2 are allocated on the basis of number of transactions and square feet occupied, respectively. Assuming that Danville Manufacturing Company allocates service department 1 costs first, the amount of service department 1 costs allocated to service department 2 under the step-down method would be: A. $0. B. $1,600. C. $2,000 D. $2,400.

Explanation / Answer

C. $2,000

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