After starting his first full-time position for a private company, Jason was anxious to go above and beyond the expectations of his supervisor. So, when Sarah asked him to complete the support department cost allocations for all departments using the same method as they used last year, he thought, "Here's my chance!" In addition to the step method that this company was currently using, Jason remembered learning two other methods for allocating these costs-the direct method and the reciprocal method. The two operating segments of this company reflect their locations-Suburban and Downtown. The two support departments are Administrative Services and Maintenance Services. Their costs have been allocated by administrative hours and maintenance hours, respectively. Here are the relevant costs and usages for all four of these departments. Original cost Administrative hours used Maintenance hours used (a) Support Departments Administrative $52,000 200 Maintenance $39,000 100 Operating Departments Suburban $185,000 250 350 Downtown $207,000 150 650 Rank the two support departments based on their original cost (as was done last year), and allocate the support department costs using the step method.
After starting his first full-time position for a private company, Jason was anxious to go above and beyond the expectations of his supervisor. So, when Sarah asked him to complete the support department cost allocations for all departments using the same method as they used last year, he thought, "Here's my chance!" In addition to the step method that this company was currently using, Jason remembered learning two other methods for allocating these costs-the direct method and the reciprocal method. The two operating segments of this company reflect their locations-Suburban and Downtown. The two support departments are Administrative Services and Maintenance Services. Their costs have been allocated by administrative hours and maintenance hours, respectively. Here are the relevant costs and usages for all four of these departments. Original cost Administrative hours used Maintenance hours used (a) Support Departments Administrative $52,000 200 Maintenance $39,000 100 Operating Departments Suburban $185,000 250 350 Downtown $207,000 150 650 Rank the two support departments based on their original cost (as was done last year), and allocate the support department costs using the step method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
am. 254.
Transcribed Image Text:### Context and Data Allocation for Departments
After starting his first full-time position for a private company, Jason was anxious to go above and beyond the expectations of his supervisor. So, when Sarah asked him to complete the support department cost allocations for all departments using the same method as they used last year, he thought, “Here’s my chance!” In addition to the step method that this company was currently using, Jason remembered learning two other methods for allocating these costs—the direct method and the reciprocal method.
The two operating segments of this company reflect their locations—Suburban and Downtown. The two support departments are Administrative Services and Maintenance Services. Their costs have been allocated by administrative hours and maintenance hours, respectively. Here are the relevant costs and usages for all four of these departments.
#### Cost and Usage Table
| | Support Departments | | Operating Departments | |
|----------------------------------|---------------------|----------------|-----------------------|------------|
| | Administrative | Maintenance | Suburban | Downtown |
| Original cost | $52,000 | $39,000 | $185,000 | $207,000 |
| Administrative hours used | – | 100 | 250 | 150 |
| Maintenance hours used | 200 | – | 350 | 650 |
### Task
(a) **Rank the two support departments based on their original cost (as was done last year), and allocate the support department costs using the step method.**
This task involves using the step method to allocate costs, which takes into account the hierarchy of departments based on their original costs. The first step is to rank the departments, followed by allocating costs accordingly.
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