Arbon Company has three service departments and two operating departments. Selec

Question

Arbon Company has three service departments and two operating departments. Selected data concerming the five departments are presented below: Total $94,000 80 $67,800 60 536,000 $256,100 $498,600 $952,500 Number of e Square metres of space 240 1,000 6003001,280 2,000 7,000 11,500 30,00045,00075,000 300 1,200 occupied Machine-hours 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) Using the step-down method, allocate the service department costs to the operating departments. (Negative amounts should be indicated by a minus sign.) Service De part Operating Departments Finishing Total AdministrativeJanitorialMaintenancePrep Departmental costs before allocations Administrative Janitorial Maintenance Total costs after allocation

Explanation / Answer

OVERHEAD ALLOCATION SUMMARY ADMIN JANITORIAL MAINTENANCE PREP FINISHING TOTAL Cost before allocations 94000 67800 36000 256100 498600 952500 Alloations: Admin (In number of employees) -94000 4700 18800 47000 23500 0 Janitorial (Space occupied) 0 -72500 7250 14500 50750 0 Maintenance (MH) 0 0 -62050 24820 37230 0 Total cost after allocation 0 0 0 342420 610080 952500

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