City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:

-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, then the total cost of the Mixing Department after allocation would be
A) $30,107.
B) $30,642.
C) $30,428.
D) $15,000.

Question

City Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:
 
-If the step-down method is used to allocate costs, and the Maintenance Department renders the greatest service, then the total cost of the Mixing Department after allocation would be
A) $30,107. 
B) $30,642. 
C) $30,428. 
D) $15,000.

Quizplus · Accepted Answer

The step-down method allocates costs to departments based on the amount of service they provide to other departments. In this case, the Maintenance Department renders the greatest service, so it will receive the largest allocation of costs. The total cost of the Mixing Department after allocation would be $30,107.

City Company Has Two Service Departments, Maintenance and Personnel, as Well