Dunwoody Corporation has two service departments (Maintenance and Human Resources)and three production departments (Machining,Assembly,and Finishing).The two service departments service the production departments as well as each other,and studies have shown that Maintenance provides the greater amount of service.On the basis of this information,which of the following cost allocations would likely occur under the step-down method?

Question

Quizplus · Accepted Answer

The step-down method starts with the service department that provides the greatest amount of service, which in this case is Maintenance. Therefore, Maintenance costs would be allocated to both production and service departments, including Human Resources. This fulfills option C. Then, the costs of Human Resources would be allocated to the remaining production departments, which are Machining and Finishing. Therefore, option B is also fulfilled. Both options B and C are included in choice E, making it the best choice. Option A is incorrect because Machining and Assembly are both production departments, so cost allocation would not occur between them. Option D is incorrect because Maintenance is a service department, not Human Resources, so cost allocation would not occur from Human Resources to Maintenance.

Dunwoody Corporation Has Two Service Departments (Maintenance and Human Resources)and