Jay Corp has two service departments, Maintenance and Personnel. Maintenance Dep
ID: 2449191 • Letter: J
Question
Jay Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $600,000 are allocated on the basis of budgeted maintenance hours. Personnel Department costs of $200,000 are allocated based on the number of employees. The costs of operating departments A and B are $320,000 and $480,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
Support Departments
Production Departments
Maintenance Department
Personnel Department
A
B
Budgeted costs
$600,000
$200,000
$320,000
$480,000
Budgeted maintenance-hours
NA
1600
2400
1200
Number of employees
100
NA
400
1200
Requirements:
a) If direct method is used, what amount will be allocated to both production departments?
b) If step-down method is used, what amount will be allocated to both production departments?
Support Departments
Production Departments
Maintenance Department
Personnel Department
A
B
Budgeted costs
$600,000
$200,000
$320,000
$480,000
Budgeted maintenance-hours
NA
1600
2400
1200
Number of employees
100
NA
400
1200
Explanation / Answer
Jay Corp has two service departments, Maintenance and Personnel. Maintenance Dep
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