Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $390,000 are allocated...
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $390,000 are allocated on the basis of budgeted maintenance−hours.
Personnel Department costs of $190,000 are allocated based on the number of employees. The costs of operating departments A and B are $232,000 and $348,000, 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 |
$390,000 |
$190,000 |
$232,000 |
$348,000 |
| Budgeted
maintenance−hours |
NA |
880 |
1,220 |
640 |
|
Number of employees |
50 |
NA |
300 |
610 |
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. $84,599
B. $42,701
C. $44,380
D. $ 91,095
Homework Answers
Answer
- Total maintenance hours = 880 + 1220 + 640 = 2740 hours
- Maintenance department cost = $ 390,000
- Department B hours = 640
- Maintenance cost to be allocated = $ 390,000 x 640 / 2740
= $ 91,095 - Correct Answer = Option ‘D’ $ 91,095
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