Martina, Inc. has two service departments (Human Resources and Building Maintena

Question

Martina, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly). The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows.

Human Resources 6,000

Building Maintenance 13,000

Machining 18,000

Assembly 26,000

Assuming use of the step-down method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?

19,000 44,000 50,000 or 63,000

Explanation / Answer

C option is correct that is 50,000

using step down method

Building maintenance cost will be allocated as

human resources 6,000
Machining 18,000
Assembly 26,000
Total 50,000

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