Gonzalez Company has two service departments,Maintenance and Human Resources.Gonzalez Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year:
$\begin{array}{lllll}&&\text { Human }\
&\text { Maintenance } &\text { Resources } & \text { Mixing } & \text { Finishing }\
\text { Direct costs } & \$ 126,000 & \$ 84,000 & \$ 105,000 & \$ 175,000 \
\text { Square footage } & 800 & 400 & 1,600 & 1,200 \
\text { Number of employees } & 8 & 12 & 24 & 32
\end{array}$
Assume the step-down method is used to allocate service department costs,and the Maintenance Department is allocated first.The amount of cost allocated from the Maintenance Department to the Finishing Department would be ________.
A) $31,500
B) $42,750
C) $47,250
D) $57,000

Question

Quizplus · Accepted Answer

The Maintenance Department costs are allocated first, based on square footage. The Finishing Department has 1,200 square feet, which is 1,200/2,000 = 60% of the total square footage. Therefore, the Finishing Department is allocated 60% of the Maintenance Department costs, which is $126,000 * 60% = $47,250.

Gonzalez Company Has Two Service Departments,Maintenance and Human Resources Assume the Step-Down Method Is Used to Allocate Service Department