Ponce Corporation, a manufacturer, uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Data concerning those departments follow: Administration Department costs are allocated first on the basis of labor hours and Facilities Department costs are allocated second on the basis of space occupied.
-The total Finishing Department cost after allocations is closest to:
A)$515,170
B)$510,933
C)$504,110
D)$515,379

Question

Ponce Corporation, a manufacturer, uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Data concerning those departments follow:  Administration Department costs are allocated first on the basis of labor hours and Facilities Department costs are allocated second on the basis of space occupied.
-The total Finishing Department cost after allocations is closest to:
A)$515,170 
B)$510,933 
C)$504,110 
D)$515,379

Quizplus · Accepted Answer

Allocation base for Administration costs = 2,000 + 27,000 + 14,000 = 43,000
Allocation base for Facilities costs = 34,000 + 9,000 = 43,000
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Ponce Corporation, a Manufacturer, Uses the Step-Down Method to Allocate