(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
Costs in the Personnel Department total $168,283 per year.
-Assume that SJM uses the step-down method to allocate service department costs,starting with Maintenance.The total overhead allocated from Cafeteria to Processing would be closest to:
A) $21,316
B) $22,398
C) $21,279
D) $23,643

Question

(Appendix 4B) Anchor Corporation has two service departments, Personnel and Engineering, and two operating departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows:
  Costs in the Personnel Department total $168,283 per year.
-Assume that SJM uses the step-down method to allocate service department costs,starting with Maintenance.The total overhead allocated from Cafeteria to Processing would be closest to:
A) $21,316 
B) $22,398 
C) $21,279 
D) $23,643

Quizplus · Accepted Answer

Allocation base for Maintenance costs = 1,000 + 11,000 + 9,000 = 21,000
Allocation base for Cafeteria costs = 400 + 360 = 760
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(Appendix 4B) Anchor Corporation Has Two Service Departments, Personnel and Engineering