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 based on the quantity of service each support department provides to other support departments, the total cost of support department C will be:
A) $30,000
B) $37,750
C) $42,000
D) $49,750

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 based on the quantity of service each support department provides to other support departments, the total cost of support department C will be:
A) $30,000 
B) $37,750 
C) $42,000 
D) $49,750

Quizplus · Accepted Answer

To allocate the costs using the step-down method based on the quantity of service provided by each support department, we need to first allocate the costs of support department A to support departments B and C based on their respective usages. This gives us:

Support Department A:
- Total Cost = $25,000
- Usage by Support Department B = $8,000
- Usage by Support Department C = $12,000
- Allocation to Support Department B = $8,000
- Allocation to Support Department C = $12,000

Support Department B:
- Total Cost = $20,000 + $8,000 (Allocation from Support Department A) = $28,000
- Usage by Support Department C = $10,000
- Allocation to Support Department C = $10,000

Support Department C:
- Total Cost = $30,000 + $12,000 (Allocation from Support Department A) + $10,000 (Allocation from Support Department B) = $52,000
- Usage by other support departments = 0
- Total cost allocated to other cost centers = $0
- Total cost allocated to production departments = $52,000

Therefore, the total cost of support department C after allocation is $52,000.

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