Danville Manufacturing
The Danville Manufacturing Company has two service departments and two producing departments. The following data are available for 2006.
$$\begin{array} { l c c c c }
& \begin{array} { c }
\text { Service } \
\text { Dept. 1 }
\end{array} & \begin{array} { c }
\text { Service } \
\text { Dept. 2 }
\end{array} & \begin{array} { c }
\text { Producing } \
\text { 1 }
\end{array} & \begin{array} { c }
\text { Producing } \
\mathbf { 2 }
\end{array} \
\hline \text { Department Costs } & \$ 12000 & \$ 8000 & \$ 60000 & \$ 70000 \
\text { Number of Transactions } & 6000 & 4000 & 6000 & 14000 \
\text { Square Feet Occupied } & 2000 & 1000 & 4000 & 6000
\end{array}$$
-Assuming that Danville Manufacturing Company allocates Service Department 1 costs first,the amount of Service Department 1 costs allocated to Service Department 2 under the step-down method would be:

Question

Danville Manufacturing
The Danville Manufacturing Company has two service departments and two producing departments. The following data are available for 2006.
$$\begin{array} { l c c c c } 
& \begin{array} { c } 
\text { Service } \
\text { Dept. 1 }
\end{array} & \begin{array} { c } 
\text { Service } \
\text { Dept. 2 }
\end{array} & \begin{array} { c } 
\text { Producing } \
\text { 1 }
\end{array} & \begin{array} { c } 
\text { Producing } \
\mathbf { 2 }
\end{array} \
\hline \text { Department Costs } & \$ 12000 & \$ 8000 & \$ 60000 & \$ 70000 \
\text { Number of Transactions } & 6000 & 4000 & 6000 & 14000 \
\text { Square Feet Occupied } & 2000 & 1000 & 4000 & 6000
\end{array}$$
-Assuming that Danville Manufacturing Company allocates Service Department 1 costs first,the amount of Service Department 1 costs allocated to Service Department 2 under the step-down method would be:

Quizplus · Accepted Answer

According to the step-down method, Service Department 1 costs are allocated to Service Department 2 before they are allocated to the production departments. Since Service Department 1 provides services to both Service Department 2 and the production departments, its costs should be allocated to both of them.

In this case, Service Department 1 has a total cost of $4000, and it provides 50% of its services to Service Department 2. Therefore, $2000 (50% of $4000) of Service Department 1 costs should be allocated to Service Department 2 under the step-down method.

Danville Manufacturing the Danville Manufacturing Company Has Two Service Departments

Danville Manufacturing
the Danville Manufacturing Company Has Two Service Departments