Question

Company “ABC” has two service departments. Maintenance and personnel. Maintenance Department cost pf $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel department costs of $80,000 are allocated based on the number of employees. The costs of operating departments A and B are $160,000 and $240,000 respectively. Data on budgeted maintenance-hours and number of employees:

Support Departments		Production Departments
	Maintenance Department	Personnel Department	A	B
Budgeted costs	$320,000	$80,000	$160,000	$240,000
Budg maintenance-hrs	NA	800	960	640
Number of employees	40	NA	160	480

Using the direct method, what amount of Maintenance Department and Personnel Department costs will be allocated to Department A and B?

a) 96,000 and 64,000

b) 192,000 and 128,000

c) 156,000 and 132,000

d) none of the above.

b. Using the step-down method what amount of Maintenance Department cost will be allocated to Personnel Department, Department A and Department B?

a) 120,966; $64,000 and 130,000

b) 106,666; $128,000 and 85,333

c) 150,657; $114,667 and 76,092

d) none of the above

c. Using the step-down method, what mount of personal department cost will be allocated to Department A and B?

a) 164,000 and 130,000

b) 128,000; 85,333

c) 46,667 and 40,000

d) none of the above

SHOW YOUR WORK !!!!

Answer 1

1)	Direct Method
				Maintenance	Personnel
				Department	Department	A	B
	Budgeted costs			320,000	80,000	160,000	240,000
	Budgeted maintenance hours			-320,000		192000	128000
	number of Employees				-80,000	20000	60000
	total			0	0	372,000	428,000
	option b)
	$192,000 and $128,000
2)	Step down method
				Maintenance	Personnel
				Department	Department	A	B
	Budgeted costs			320,000	80,000	160,000	240,000
	Budgeted maintenance hours			-320,000	106667	128000	85333
	number of Employees				-186,667	46667	140000
	total			0	0	334,667	465,334
b)	option b)
	106,667 ;128,000 and 85,333
c)	option d
	none of the above