Step-Down Method
University District Co-op, a whole foods grocery and coffee shop, has provided the following data to be used in its service department cost allocations:
| Service Departments | Operating Departments | ||
| Administration | Building Services | Groceries | Coffee Shop |
Departmental costs before allocations | $200,000 | $60,000 | $3,860,000 | $340,000 |
Employee-hours | 480 | 320 | 2,720 | 160 |
Space occupied in square feet | 800 | 1,200 | 9,500 | 500 |
Required:
Using the step-down method, allocate the costs of the service departments to the two operating departments. Allocate the costs of the Administration Department first on the basis of employee- hours and then the costs of the Building Services Department on the basis of space occupied.
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