Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $350,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $184,000 and $276,000, 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 A if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)
A) $231,452
B) $121,677
C) $50,111
D) $159,444

Question

Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $350,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $184,000 and $276,000, 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 A if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)
A) $231,452 
B) $121,677 
C) $50,111 
D) $159,444

Quizplus · Accepted Answer

Maintenance provides the greatest amount of service to support departments, so it is allocated first.
Dept A: 1230 / (840 + 1230 + 630) × $350,000 = $159,444

Hanung Corp Has Two Service Departments, Maintenance and Personnel