Midwest Alabama State College has two service departments, the Library and Computing Services that assist the School of Business and the School of Health. Budgeted costs of the Library and Computing Services are $800,000 and $1,800,000, respectively. Usage of the service departments' output during the year is anticipated to be:

Required:
A. Use the direct method to allocate the costs of the Library and Computing Services to the School of Business and the School of Health.
B. Repeat requirement "A" using the step-down method. Midwest allocates the cost of Computing Services first.

Question

Midwest Alabama State College has two service departments, the Library and Computing Services that assist the School of Business and the School of Health. Budgeted costs of the Library and Computing Services are $800,000 and $1,800,000, respectively. Usage of the service departments' output during the year is anticipated to be:
  
Required: 
A. Use the direct method to allocate the costs of the Library and Computing Services to the School of Business and the School of Health.
B. Repeat requirement "A" using the step-down method. Midwest allocates the cost of Computing Services first.

Quizplus · Accepted Answer

The Answer of Midwest Alabama State College has two service departments, the Library and Computing Services that assist the School of Business and the School of Health. Budgeted costs of the Library and Computing Services are $800,000 and $1,800,000, respectively. Usage of the service departments' output during the year is anticipated to be:
  
Required: 
A. Use the direct method to allocate the costs of the Library and Computing Services to the School of Business and the School of Health.
B. Repeat requirement "A" using the step-down method. Midwest allocates the cost of Computing Services first.

Midwest Alabama State College Has Two Service Departments, the Library