Problem

Step-Down MethodArbon Company has three service departments and two operating departments....

Step-Down Method

Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented below:

 

Service Departments

operating Departments .

 

Administrative

Janitorial

Equipment Maintenance

Prep

Finishing

Total

Costs

$84,000

$67,800

$36,000

$256,100

$498,600

$942,500

Number of employees

80

60

240

600

300

1,280

Square feet of space occupied

3,000

12,000

10,000

20,000

70,000

115,000

Machine-hours

 

 

 

10,000

30',000

40,000

The company allocates service department costs by the step-down method in the following order: Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine-hours).

Required:

Using the step-down method, allocate the service department costs to the operating departments.

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Solutions For Problems in Chapter 4B