**Casas Corporation Allocation of Fixed Costs**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 is as follows:- **Personnel**: 20 employees- **Cafeteria**: 30 employees- **Customer Care**: 305 employees- **Customer Solutions**: 290 employees- **Total**: 645 employeesThe fixed costs of the Personnel Department are allocated based on the number of employees. If these costs are budgeted at $46,250, the amount allocated to the Cafeteria using the step-down method would be closest to:**Multiple Choice:**- $0- $2,220.00- $2,151.16- $3,365.59In order to answer the question, it's important to understand the step-down method of cost allocation. This method first allocates costs to service departments based on their proportion of a chosen allocation base (in this case, the number of employees), and then these service departments' costs are subsequently allocated to the operating departments.Use the following calculations to allocate the fixed Personnel costs to the Cafeteria:1. **Total employees across all departments**: 6452. **Proportion of employees in Cafeteria**: 30/6453. **Allocation of Personnel costs to Cafeteria**:\[ \text{Allocation to Cafeteria} = \text{Budgeted Fixed Costs} \times \left(\frac{\text{Employees in Cafeteria}}{\text{Total Employees}}\right) \]\[ \text{Allocation to Cafeteria} = \$46,250 \times \left(\frac{30}{645}\right) \]\[ \text{Allocation to Cafeteria} = \$46,250 \times 0.0465116 \approx \$2,151.16 \]Thus, the closest amount of Personnel Department cost allocated to the Cafeteria under the step-down method would be:**$2,151.16****Answer: $2,151.16**

The costs are allocated on the basis of step allocation method.

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: Personnel 20 Cafeteria 30 Customer Care 305 Customer Solutions 290 Total 645 The fixed costs of the Personnel Department are allocated on the basis of the number of employees. If these costs are budgeted at $46,250, the amount of Personnel Department cost allocated to the Cafeteria under the step-down method would be closest to:

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: Personnel 20 Cafeteria 30 Customer Care 305 Customer Solutions 290 Total 645 The fixed costs of the Personnel Department are allocated on the basis of the number of employees. If these costs are budgeted at $46,250, the amount of Personnel Department cost allocated to the Cafeteria under the step-down method would be closest to:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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