Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $208,000 and $312,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)
A) $31,079
B) $79,424
C) $49,640
D) $88,489

Question

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $208,000 and $312,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Production
Support DepartmentsDepartments

Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)
A) $31,079 
B) $79,424 
C) $49,640 
D) $88,489

Quizplus · Accepted Answer

Maintenance provides the greatest amount of service to support departments, so it is allocated first. Dept B: 690 / (860 + 1230 + 690) × $320,000 = $79,424

Hanung Corp Has Two Service Departments, Maintenance and Personnel