Chapter 4.B, Problem 2E

EXERCISE 4B-2 Step-Down Method LO4-11

Madison Park Co-op. a whole foods grocery and gift shop, has provided the following data to be used in the service department cost allocations:

Service Departments Operating Departments

	Administration Janitorial	Groceries	Gifts
Departmental costs before allocations…	$150,000	$40,000	$2,320,000	$950,000
Employee-hours	320	160	3,100	740
Space occupied-square feet	250	100	4,000	1,000

Required:

Using the step-down method, allocate the costs of the service departments to the two operating departments Allocate Administration first on the basis of employee-hours and then Janitorial on the basis of space occupied.