Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest

ACCOUNTING

Multiple Choice

Jake’s Battery Company has two service departments, Maintenance and Personnel. Maintenance Department costs of $160,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $40,000 are allocated based on the number of employees. The costs of operating departments A and B are $80,000 and $120,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:


Support Departments

Production Departments



Maintenance Department

Personnel

Department

A

B

Budgeted costs

$160,000

$40,000

$80,000

$120,000

Budgeted maintenance-hours

NA

400

480

320

Number of employees

20

NA

80

240


Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B if the service department with the highest percentage of interdepartmental support service is allocated first? (Round up)

a. $32,000

b. $42,667

c. $57,334

d. $64,000

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