Cervetti,Inc.,allocates service department costs to operating departments using the step-down method.The company has two service departments,Administration and Physical Plant,and two operating departments,Assembly and Testing.Data concerning those departments follow:
Administration Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied.The total Testing Department cost after allocations is closest to:
A) $754,279
B) $757,240
C) $748,960
D) $757,368

Question

Cervetti,Inc.,allocates service department costs to operating departments using the step-down method.The company has two service departments,Administration and Physical Plant,and two operating departments,Assembly and Testing.Data concerning those departments follow:
 Administration Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied.The total Testing Department cost after allocations is closest to:
A) $754,279 
B) $757,240 
C) $748,960 
D) $757,368

Quizplus · Accepted Answer

Allocation base for Administration costs = 1,000 + 25,000 + 12,000 = 38,000
Allocation base for Physical Plant costs = 37,000 + 6,000 = 43,000
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