Deardurff Legal Services, LLC, uses the step-down method to allocate service dep

Question

Deardurff Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow:

Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.

The total Corporate Law Department cost after allocations is closest to: (Do not round intermediate calculations.)

$417,670

$418,424

$397,780

$417,681

Deardurff Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow:

Explanation / Answer

Service Department Operating Department Personnel IT Family Corporate Ratios Ratios Law Law   Departmental Costs 48360 45540 357120 360440 A B   Employees 1 20 114 178 312.00 292   PCs 12 20 110 156 Inter Allocation 3276 3100 C ( As per :B) (As per :A) 266 Allocation of Personnal Cost ( As per A) 3100 17670 27590 48360 Total of lT Cost 48640 Allocation of lT Cost ( As per C) 20114 28526 48640 Total Cost 394904 416556 According to step down method we will allocate the service department cost to oerational department and to service department. but to choose the first service departmenrt which should be allocated first, we have to decide which service departmenr contribute more to other sedrvice department. On the basis of inter allocation, we can choose Personnel department cost to be allocated first as it is contributng to IT departmenrt hire than to IT Department contributing to Personnel.

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