Madison Park Co-op, a whole foods grocery and gift shop, has provided the follow

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: Service Departments Operating Departments Administration Janitorial Groceries Gifts Departmental costs before allocations $210,000 $60,000 $3,900,000 $350,000 Employee-hours 490 300 2,750 150 Space occupied—square feet 800 1,300 9,400 600 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.)

Explanation / Answer

Total Employee hours = 300 + 2,750 +150 = 3,200 hours

Total space for Groceries and Gifts = 9,400 + 600 = 10,000

Administration Janitorial Groceries Gifts Cost $210,000 $60,000 $3,900,000 $350,000 Allocation of administration cost ($210,000) $210,000 x 300/3,200 = $19,687.50 $210,000 x 2,750/3,200 = $180,468.75 $210,000 x 150/3,200 = $9,843.75 Total 0 $79,687.50 $4,080,468.75 $359,843.75 Allocation of Janitorial cost 0 ($79,687.50) $79,687.50 x 9,400 / 10,000 = $74,906.25 $79,687.50 x 600/10,000 = $4,781.25 Total cost 0 0 $4,155,375 $364,625

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