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: dministration Janitorial Departmental costs before allocations Employee-hours Space occupied-square feet $190,000 470 800 $60,000 340 1,400 $3,820,000 2,710 9,200 $330,000 150 800 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.) Answer is not complete. Service Departments Gifts Total Departmental costs before allocations Allocation: 190,000 60,000 3,820,000 330,000 4,400,000 190,000) Administration costs Janitorial costs 60,000) 3 0 303 3,820.000 30,000 3 4150,000 330,000 4,150,000 Total costs after allocation

Explanation / Answer

Total Employee hours = 340 + 2,710 +150 = 3,200 hours

Total space for Groceries and Gifts = 9,200 + 800 = 10,000

Service Department Operating Department Administration Janitorial Groceries Gifts Total Departmental Store before allocations $190,000 $60,000 $3,820,000 $330,000 $4,400,000 Allocation: Administration costs (190,000) 190,000 x 340/3,200 = 20,187.50 190,000 x 2,710/3,200 = 160,906.25 190,000 x 150/3,200 = 8,906.25 0 Janitorial costs (80,187.50) 80,187.50 x 9,200/10,000 = 73,772.50 80,187.50 x 800/10,000 = 6,415.00 0 Total costs after allocation $0 $0 $4,054,679 $345,321 $4,400,000

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