Use the following information to answer the following Questions
Marshall Welding Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows.

-Marshall Welding uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Assembly?
A) $0.
B) $480,572.
C) $444,444.
D) $666,666.
E) None of the answers is correct.

Question

Use the following information to answer the following Questions
Marshall Welding Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows.

-Marshall Welding uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Assembly?
A) $0. 
B) $480,572. 
C) $444,444. 
D) $666,666. 
E) None of the answers is correct.

Quizplus · Accepted Answer

The step-down method allocates costs from the department providing the most service first. Human Resources costs are allocated based on the number of employees. If Assembly has 2/3 of the employees, then 2/3 of $1,200,000 is allocated to Assembly, which is $800,000. However, since Cafeteria also receives some allocation, the amount allocated to Assembly is $1,200,000 - $400,000 = $800,000.

Use the Following Information to Answer the Following Questions