Cope, Inc. has the following costs and usage data for its support departments: If the step-down method is used, and the order of allocation is department B first, then A, and finally C, the amount of support department A costs allocated to operating department 2 will be:
A) $15,000
B) $23,250
C) $24,000
D) $18,600

Question

Cope, Inc. has the following costs and usage data for its support departments:  If the step-down method is used, and the order of allocation is department B first, then A, and finally C, the amount of support department A costs allocated to operating department 2 will be:
A) $15,000 
B) $23,250 
C) $24,000 
D) $18,600

Quizplus · Accepted Answer

To allocate the support department costs using the step-down method, we first allocate the costs of department B to department A and operating departments based on their usage percentages.

Department B allocates $10,000 to department A and $15,000 to operating department 1.

Thus, department A receives a total of $30,000 ($20,000 of its own costs + $10,000 allocated from department B). Department A then allocates its own $30,000 and the $15,000 received from department B to operating department 1 and 2 based on their usage percentages.

Operating department 1 receives $15,000 from department A and $15,000 from department B, totaling $30,000. Operating department 2 receives $15,000 from department A, and a total of $18,000 from department C.

Thus, the total cost allocated to operating department 2 is $33,000 ($15,000 from department A + $18,000 from department C).

Cope, Inc Has the Following Costs and Usage Data for Its