Use the information below to answer the following question(s).Joe's Tire Company has two support departments, Personnel and Maintenance.The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $20,000 are allocated based on the number of employees.Costs of Departments A and B are $40,000 and $60,000, respectively.Data on standard service hours and number of employees are as follows:

-What is the cost of the Maintenance Department allocated to Department B using the step-down method if the support department with the highest percentage of interdepartmental service to the other support department is allocated first?
A)$16,000
B)$21,333
C)$12,800
D)$32,000
E)$48,000

Question

Use the information below to answer the following question(s).Joe's Tire Company has two support departments, Personnel and Maintenance.The Maintenance Department costs of $80,000 are allocated on the basis of standard service hours used.The Personnel Department costs of $20,000 are allocated based on the number of employees.Costs of Departments A and B are $40,000 and $60,000, respectively.Data on standard service hours and number of employees are as follows:
 
-What is the cost of the Maintenance Department allocated to Department B using the step-down method if the support department with the highest percentage of interdepartmental service to the other support department is allocated first?
A)$16,000 
B)$21,333 
C)$12,800 
D)$32,000 
E)$48,000

Quizplus · Accepted Answer

To use the step-down method, we first allocate the support department with the highest percentage of interdepartmental service to the other support department. In this case, Personnel has 20,000/100,000 = 20% of its costs used by Maintenance, while Maintenance has 80,000/100,000 = 80% of its costs used by Department B.
Allocate Personnel costs to Maintenance: 20,000 x 80% = 16,000
Therefore, the total cost of Maintenance allocated to Department B is:
80,000 + 16,000 x (35,000/60,000) = $21,333

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