The Mohawk-Hudson Company is an electric utility which has two service departments, Accounting and Maintenance. It has two operating departments, Generation and Transmission. The company does not distinguish between fixed and variable service department costs. Maintenance Department costs are allocated on the basis of maintenance hours. Accounting Department costs are allocated to operating departments on the basis of accounting hours of service provided. Budgeted costs and other data for the coming year are as follows: The step-down method is used to allocate service department costs, with the accounting department being allocated first.
-The amount of Maintenance Department cost allocated to the Accounting Department would be:
A) $0
B) $69,315
C) $75,000
D) $88,000

Question

The Mohawk-Hudson Company is an electric utility which has two service departments, Accounting and Maintenance. It has two operating departments, Generation and Transmission. The company does not distinguish between fixed and variable service department costs. Maintenance Department costs are allocated on the basis of maintenance hours. Accounting Department costs are allocated to operating departments on the basis of accounting hours of service provided. Budgeted costs and other data for the coming year are as follows:  The step-down method is used to allocate service department costs, with the accounting department being allocated first.
-The amount of Maintenance Department cost allocated to the Accounting Department would be:
A) $0 
B) $69,315 
C) $75,000 
D) $88,000

Quizplus · Accepted Answer

The Maintenance Department cost is not allocated to the Accounting Department, as typically, internal service department costs are allocated to revenue-generating departments, not to other service departments.

The Mohawk-Hudson Company Is an Electric Utility Which Has Two