Answer the following question(s)using the information below:
Betty's Book and Music Store has two service departments, Warehouse and Data Centre.Warehouse Department costs of $175,000 are allocated on the basis of budgeted warehouse-hours.Data Centre Department costs of $75,000 are allocated based on the number of computer log-on hours.The costs of operating departments Music and Books are $125,000 and $150,000, respectively.Data on budgeted warehouse-hours and number of computer log-on hours are as follows:

-Using the step-down method, what amount of Data Centre Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)
A)$58,671
B)$33,333
C)$46,296
D)$41,667
E)$0

Question

Answer the following question(s)using the information below:
Betty's Book and Music Store has two service departments, Warehouse and Data Centre.Warehouse Department costs of $175,000 are allocated on the basis of budgeted warehouse-hours.Data Centre Department costs of $75,000 are allocated based on the number of computer log-on hours.The costs of operating departments Music and Books are $125,000 and $150,000, respectively.Data on budgeted warehouse-hours and number of computer log-on hours are as follows:
 
-Using the step-down method, what amount of Data Centre Department cost will be allocated to Department Music if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)
A)$58,671 
B)$33,333 
C)$46,296 
D)$41,667 
E)$0

Quizplus · Accepted Answer

To use the step-down method, we need to allocate the service department costs based on the highest percentage of interdepartmental support service. In this case, the Warehouse Department has the highest percentage of service provided to other departments, so we'll allocate its costs first.

Step 1: Allocate Warehouse Department costs.
The Warehouse Department costs are allocated based on budgeted warehouse-hours.
Music Department: 15,000 / 35,000 x $175,000 = $75,000
Books Department: 20,000 / 35,000 x $175,000 = $100,000

Step 2: Allocate Data Centre Department costs.
The Data Centre Department costs are allocated based on the number of computer log-on hours.
Music Department: 3,000 / 7,000 x $75,000 = $32,143
Books Department: 4,000 / 7,000 x $75,000 = $42,857

Step 3: Allocate the remaining Music and Books Department costs.
Since there are no more service departments, we can allocate the remaining costs directly to the Music and Books Departments based on their own activity measures.
Music Department: $125,000 + $32,143 = $157,143
Books Department: $150,000 + $42,857 = $192,857

Therefore, the amount of Data Centre Department cost allocated to Department Music is $32,143, which is option C.

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