Williams manufactures a variety of iron products,made to customer specifications,in small batches.Willie Williams,owner,is concerned that he does not have an accurate understanding of the costs of production.You,a newly-minted MBA,have researched his business and identified various costs and cost drivers. $\begin{array}{c}\begin{array}{lll}\\\\\text {Own costs}\\\text {Square feet}\\\text {\# employees}\\\text {\#transactions (thou) }\\\text {Power usage}\\\end{array}\begin{array}{r}\\\text { Janitorial } \\\$ 12,000 \\500 \\7 \\30 \\22\end{array}\begin{array}{r}\\\text { Welding}\\ \$ 90,000 \\3,000\\25\\100\\730\end{array}\begin{array}{r}\\\text{HR} \\\$ 37,200 \\1,500 \\8 \\180 \\11 \end{array}\begin{array}{r}\text{Data}\\\text{ Sves}\\\$ 32,400 \\2,000\\10\\600\\17\end{array}\begin{array}{r}\\\text{Assembly}\\ \$ 54,000 \\4,500\\75\\140\\220\end{array}\begin{array}{r}\\\text{Total}\\ \$ 225,601 \\11,500\\125\\1,050\\1,000\end{array}\end{array}$
The service departments (Janitorial,HR,and Data Services) are allocated to the two production departments (Welding and Assembly) .Janitorial costs are allocated using square feet,HR using number of employees,and Data Services using number of transactions.You recall that there are several approaches to the allocation of service department costs,direct,step-down and reciprocal methods.
If the step-down method is applied,allocating the most costly department first,which is true?

Question

Williams manufactures a variety of iron products,made to customer specifications,in small batches.Willie Williams,owner,is concerned that he does not have an accurate understanding of the costs of production.You,a newly-minted MBA,have researched his business and identified various costs and cost drivers.

\begin{array}{c}\begin{array}{lll}\\\\\text {Own costs}\\\text {Square feet}\\\text {\# employees}\\\text {\#transactions (thou) }\\\text {Power usage}\\\end{array}\begin{array}{r}\\\text { Janitorial } \\\$ 12,000 \\500 \\7 \\30 \\22\end{array}\begin{array}{r}\\\text { Welding}\\ \$ 90,000 \\3,000\\25\\100\\730\end{array}\begin{array}{r}\\\text{HR} \\\$ 37,200 \\1,500 \\8 \\180 \\11 \end{array}\begin{array}{r}\text{Data}\\\text{ Sves}\\\$ 32,400 \\2,000\\10\\600\\17\end{array}\begin{array}{r}\\\text{Assembly}\\ \$ 54,000 \\4,500\\75\\140\\220\end{array}\begin{array}{r}\\\text{Total}\\ \$ 225,601 \\11,500\\125\\1,050\\1,000\end{array}\end{array}

The service departments (Janitorial,HR,and Data Services) are allocated to the two production departments (Welding and Assembly) .Janitorial costs are allocated using square feet,HR using number of employees,and Data Services using number of transactions.You recall that there are several approaches to the allocation of service department costs,direct,step-down and reciprocal methods.
If the step-down method is applied,allocating the most costly department first,which is true?

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The Answer of Williams manufactures a variety of iron products,made to customer specifications,in small batches.Willie Williams,owner,is concerned that he does not have an accurate understanding of the costs of production.You,a newly-minted MBA,have researched his business and identified various costs and cost drivers. $\begin{array}{c} \begin{array}{lll} \ \ \text {Own costs}\ \text {Square feet}\ \text {\# employees}\ \text {\#transactions (thou)}\ \text {Power usage}\ \end{array} \begin{array}{r} \ \text { Janitorial } \ \$ 12,000 \ 500 \ 7 \ 30 \ 22 \end{array} \begin{array}{r} \ \text { Welding}\ \$ 90,000 \ 3,000\ 25\ 100\ 730 \end{array} \begin{array}{r} \ \text{HR} \ \$ 37,200 \ 1,500 \ 8 \ 180 \ 11 \end{array} \begin{array}{r} \text{Data}\ \text{ Sves}\ \$ 32,400 \ 2,000\ 10\ 600\ 17 \end{array} \begin{array}{r} \ \text{Assembly}\ \$ 54,000 \ 4,500\ 75\ 140\ 220 \end{array} \begin{array}{r} \ \text{Total}\ \$ 225,601 \ 11,500\ 125\ 1,050\ 1,000 \end{array} \end{array}$ The service departments (Janitorial,HR,and Data Services)are allocated to the two production departments (Welding and Assembly).Janitorial costs are allocated using square feet,HR using number of employees,and Data Services using number of transactions.You recall that there are several approaches to the allocation of service department costs,direct,step-down and reciprocal methods. If the step-down method is applied,allocating the most costly department first,which is true?

Williams Manufactures a Variety of Iron Products,made to Customer