Casas Corporation has two service departments,Personnel and Cafeteria,and two operating departments,Customer Care and Customer Solutions.The number of employees in each department are:
The fixed costs of the Personnel Department are allocated on the basis of the number of employees.If these costs are budgeted at $42,150,the amount of Personnel Department cost allocated to the Cafeteria under the step-down method would be closest to:
A) $19,670
B) $5,901
C) $0
D) $5,087

Question

Casas Corporation has two service departments,Personnel and Cafeteria,and two operating departments,Customer Care and Customer Solutions.The number of employees in each department are:
 The fixed costs of the Personnel Department are allocated on the basis of the number of employees.If these costs are budgeted at $42,150,the amount of Personnel Department cost allocated to the Cafeteria under the step-down method would be closest to:
A) $19,670 
B) $5,901 
C) $0 
D) $5,087

Quizplus · Accepted Answer

Allocation rate for Personnel Department services costs = Cost to be allocated ÷ Allocation base
= $42,150 ÷ (7 employees + 32 employees + 11 employees) =$843 per employee
Personnel Department cost allocated to the Cafeteria = $843 per employee × 7 employees = $5,901

Casas Corporation Has Two Service Departments,Personnel and Cafeteria,and Two Operating