University District Co-op, a food grocery and coffee shop, has provided the foll
ID: 2479153 • Letter: U
Question
University District Co-op, a food grocery and coffee shop, has provided the following data to be used in its service department cost allocations:
Service Departments
Operating Departments
Departmental costs before
Administration
Building Services
Groceries
Coffee Shop
allocations
$200,000
$60,000
$3,860,000
$340,000
Employee hours
480
320
2,720
160
Space occupied, in square metres
800
1200
9500
500
Using the step down method, allocate the costs of the service departments to the two operating departments. Allocate the costs of the Administration Department first on the basis of employee hours and then the costs of the Building Services Department on the basis of space occupied.
Service Departments
Operating Departments
Departmental costs before
Administration
Building Services
Groceries
Coffee Shop
allocations
$200,000
$60,000
$3,860,000
$340,000
Employee hours
480
320
2,720
160
Space occupied, in square metres
800
1200
9500
500
Explanation / Answer
Service Departments Operating Departments Administration Building Groceries Coffee Total Services Shop Departmental costs before allocations 200000 60000 3860000 340000 4460000 Allocated departmental -200000 20000 170000 10000 0 Cost after allocation 0 80000 4030000 350000 4460000 Allocation of building cost -80000 76000 4000 0 Cost after allocation 0 4106000 354000 4460000 Working Note Employee hours 480 320 2720 160 3680 Percentage 13.04% 8.70% 73.91% 4.35% 86.96% Allocated percentage for administration 10.00% 85.00% 5.00% 100.00% Space occupied in sq m 800 1200 9500 500 12000 Percentage 6.67% 10.00% 79.17% 4.17% 83.33% 95.00% 5.00% 100.00%
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