Arbon Company has three service departments and two operating departments. Selec

Question

Arbon Company has three service departments and two operating departments. Selected data concerning the five departments are presented below: Service Departments Operating Departments Equipment Maintenance $36,000 Janitorial $67,800 60 1,200 Administrative Total Finishing $256,100 $498,600 $945,500 Prep Costs Number of employees Square metres of space $87,000 80 1,280 7,000 11,500 16,000 32,000 48,000 240 600 300 300 1,000 2,000 occupied Machine-hours The company allocates service department costs by the step-down method in the following order: Administrative (number of employees), Janitorial (space occupied), and Equipment Maintenance (machine- hours) Required. Using the step-down method, allocate the service department costs to the operating departments (Negative amounts should be indicated by a minus sign.) Service Departments Administrative Janitorial Maintenance Operating Departments Finishing re Total Departmental costs before allocations Allocations Administrative Janitorial Maintenance Total costs after allocation

Explanation / Answer

Service Departments operating deptt Adm janitorieal Equi maint prep finishing total Departmental costs before allocations 87,000 67,800 36,000 256,100 498,600 945,500 allocations: Administration costs (60:240:600:300) -87,000 4350 17400 43500 21750 0 Janitorial (1:2:7) -72,150 7215 14430 50505 0 Equipment maintenance (1;2) -60,615 20205 40410 0 total cost after allocation 0 0 0 334,235 611,265 945,500

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