The Lots More Store has a Janitorial Department and a Personnel Department that

Question

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments. The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated based on employees. The following information is available Personnel Dept $45 000 4000 Janitorial Dept $30 000 1000 10 Sales #1 Sales #2 Sales #3 Budget Space (sq m No. of Employees 20 000 30 000 50 000 15 45 30 Using the step-down method, calculate the amount of Janitorial Department cost allocated to Sales Department #2, if the Personnel Department is allocated first. A. $10 247 B. $8571 C. $9857 D. $10 350

Explanation / Answer

Amount of Janitorial Department cost allocated to Sales Department #2 = 10,350

Personnel Dept. Janitorial Dept. Sales#1 Sales#2 Sales#3 Department costs before allocation 45,000 30,000 Allocation of personnel department costs (45,000) 4,500 6,750 20,250 13,500 Sub total 0 34,500 6,750 20,250 13,500 Allocation of Janitorial department costs (34,500) 6,900 10,350 17,250

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