(Appendix 4B) Prestwich Corporation has two service departments and two operating departments. Costs of the Building and Grounds service department are allocated to other departments on the basis of square feet of space occupied. The departments in the company and the amount of space occupied by each are presented below:
Budgeted costs in the Building and Grounds department total $34,800 for the year.
-Assuming the step-down method is used and Building and Grounds costs are allocated first,the amount of Building and Grounds costs allocated to the Cafeteria would be:
A) $0
B) $4,800
C) $4,640
D) $5,568

Question

(Appendix 4B) Prestwich Corporation has two service departments and two operating departments. Costs of the Building and Grounds service department are allocated to other departments on the basis of square feet of space occupied. The departments in the company and the amount of space occupied by each are presented below:
  Budgeted costs in the Building and Grounds department total $34,800 for the year.
-Assuming the step-down method is used and Building and Grounds costs are allocated first,the amount of Building and Grounds costs allocated to the Cafeteria would be:
A) $0 
B) $4,800 
C) $4,640 
D) $5,568

Quizplus · Accepted Answer

Allocation base = 8,000 + 20,000 + 30,000 = 58,000
Building and Grounds costs allocated to the Cafeteria = $34,800 × (8,000/58,000) = $4,800

(Appendix 4B) Prestwich Corporation Has Two Service Departments and Two