Concept explainers
PROBLEM 4B-5 Step-Down Method L04-11
Woodbury Hospital has three service departments and three operating departments. Estimated cost and operating data for all departments in the hospital for the forthcoming quarter are presented in the table below:
Service Departments
Operating Departments
Housekeeping Services |
Food Services | Admin. Services | Laboratory | Radiology | General Hospital |
Total | |
Total cost | $87,000 | $301,060 | $249,020 | $405,900 | $520,500 | $475,800 | $2,039,280 |
Meals served | 800 | 2,000 | 1,000 | 68,000 | 71,800 | ||
Square feet of space | 5.000 | 13,000 | 6,500 | 10,000 | 7,500 | 108,000 | 150,000 |
Files processed | 14,000 | 7,000 | 25,000 | 46,000 |
The costs of the service departments are allocated by the step-down method using the allocation bases and in the order shown in the following table:
Service Department Allocation Bases Housekeeping Services Square feet of space Food Services Meals served Administrative Services Ales processed
All tilling in the hospital is done through Laboratory, Radiology or General Hospital. The hospital's administrator wants the costs of the three service departments allocated to these three billing centers.
Required:
Using the step-down method, prepare the cost allocation desired by the hospital administrator. Include under each billing center the direct costs of the center, as well as the costs allocated from the service department.

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Chapter 4 Solutions
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