Motlop Manufacturing
The Motlop Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc}
&\text { Service }&\text { Service } & \text { Producing } & \text { Producing }\
&\text { Dept. 1 }&\text { Dept. 2 }&1&2\
\hline \text { Department Costs } & \$ 10000 & \$ 15000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 10000 & 5000 & 10000 & 20000 \
\text { Labour hours } & 5000 & 5000 & 12000 & 8000
\end{array}$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and labour hours respectively. Service department 1 is allocated first.
-Assuming that Motlop Manufacturing Company allocates service department 1 costs first,the amount of service department 2 costs allocated to producing department 1 under the step-down method would be:

Question

Motlop Manufacturing
The Motlop Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc} 
&\text { Service }&\text { Service } & \text { Producing } & \text { Producing }\
&\text { Dept. 1 }&\text { Dept. 2 }&1&2\
\hline \text { Department Costs } & \$ 10000 & \$ 15000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 10000 & 5000 & 10000 & 20000 \
\text { Labour hours } & 5000 & 5000 & 12000 & 8000
\end{array}$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and labour hours respectively. Service department 1 is allocated first.
-Assuming that Motlop Manufacturing Company allocates service department 1 costs first,the amount of service department 2 costs allocated to producing department 1 under the step-down method would be:

Quizplus · Accepted Answer

To allocate the service department costs using the step-down method, we need to allocate the costs of service department 1 first, which is $15,000.
After allocating service department 1 costs, we need to allocate the remaining costs of service department 2 to the producing departments based on their use of the service department.
For producing department 1, it uses 30% of service department 2's services, which amounts to $32,857 (which is 30% of $109,523).
Therefore, the amount of service department 2 costs allocated to producing department 1 would be $32,857 - $23,000 (costs already allocated to service department 1) = $9,857.
Adding the allocated service department 1 costs of $15,000 to the allocated service department 2 costs of $9,857 gives us a total of $24,857.
Finally, since the question asks for the amount of service department 2 costs allocated to producing department 1 only, the correct answer is option B, $9857.

Motlop Manufacturing the Motlop Manufacturing Company Has Two Service Departments

Motlop Manufacturing
the Motlop Manufacturing Company Has Two Service Departments