Question

Hanung Corp has two service​ departments, Maintenance and Personnel. Maintenance Department costs of $360,000 are allocated on the basis of budgeted maintenance−hours. Personnel Department costs of $140,000 are allocated based on the number of employees. The costs of operating departments A and B are $200,000 and $300,000​, respectively. Data on budgeted maintenance−hours and number of employees are as​ follows:

                                                                                                                   

	Support Departments		Production Departments
	Maintenance Department	Personnel Department	A	B
Budgeted costs	$360,000	$140,000	$200,000	$300,000
Budgeted maintenance−hours	NA	860	1,210	600
Number of employees	50	NA	270	620

Using the step−down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated​ first? (Do not round any intermediary​ calculations.)

A. $36,404

B. $63,446

C. $31,461

D. $ 80,899

Answer 1

Answer

• Maintenance cost will be allocated first as it has highest percentage of interdepartmental support service.
• Maintenance cost allocated to Department B
  = $ 360,000 x 600 machine hours/(860 + 1210 + 600)
  = 360000 x 600 / 2670
  = $ 80,899
• Correct Answer = Option ‘D’ $ 80,899