Hi. Just curious how they got the answer. Thanks Jake\'s Battery Company has two
ID: 2378257 • Letter: H
Question
Hi. Just curious how they got the answer. Thanks
Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Support Departments
Production Departments
Maintenance Department
Personnel Department
A
B
Budgeted costs
$160,000
$40,000
$80,000
$120,000
Total
Budgeted maintenance-hours
NA
110
460
290
Number of employees
70
NA
110
230
Using the stepdown method, where maintenance cost is allocated last, how much maintenance department costs is allocated to operating department A?
ans: 102,321.95
Support Departments
Production Departments
Maintenance Department
Personnel Department
A
B
Budgeted costs
$160,000
$40,000
$80,000
$120,000
Total
Budgeted maintenance-hours
NA
110
460
290
Number of employees
70
NA
110
230
Explanation / Answer
Maintenance provides the greatest amount of service to support departments, so it is allocated first. Dept A:
460/860* 160000
=$102,321.95
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