Question

Madison Park Co-op, a whole foods grocery and gift shop, has provided the following data to be used in its service department cost allocations: points Departmental costs before allocations Employee-hours Space occupied-square feet Service Departments Administration Janitorial $190,000 $60,000 460 350 900 1,200 Operating Departments Groceries Gifts $3,840,000 $340,000 2,700 150 9,500 500 eBook Hint Print 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. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) References Service Departments Administration Janitorial $ 190,000 $ 60,000 Operating Departments Groceries Gifts $ 3,840,000 $ 340,000 Total 4,430,000 $ Departmental costs before allocations Allocation: Administration costs Janitorial costs Total costs after allocation

Answer 1

Solution:

From	Service Department Cost Allocation - Step Method (Allocation of Administration First)
	Service Department		Operating Departments
	Administration	Janitorial	Groceries	Gifts	Total
Direct charges of department	$190,000	$60,000	$3,840,000	$340,000	$4,430,000
Allocation:
Administration (350:2700:150)	-$190,000	$20,781	$160,313	$8,906
Janitorial (9500:500)		-$80,781	$76,742	$4,039
Total	$0	$0	$4,077,054	$352,945	$4,430,000