Question

Using Step Down Method:

Support Departments Patient Revenue Departments Record Keeping Cleaning Eye Care Dental Care Department Costs

$ 30,000 $30,800 $61,200 $120,000

Number of Employees 3 6 9 10

Number of Rooms 2 2 6 4

E. What amount of the Cleaning is allocated to Dental Care? $

Answer 1

Answer:

$12,320

Explanation:

Note: we are allocating cost based on direct allocation method, since no method is particularly pecified

The amount of the Cleaning is allocated to Dental Care is calculated as following:

Here the cost driver for cleaning department cost is Number of rooms

Cost Base:

Total cleaning department cost = $30,800

Cost Driver Base:

Total number of Rooms (for revenue departments : 6 (eye care)+ 4 (dental care)= 10 rooms

Number of rooms in dental care = 4 rooms

Total cleaning cost allocated to dental care department = total cost base × (cost driver of dental care ÷ total cost driver base)

= $30,800 × (4 ÷ 10)

= $30,800 × .40

= $12,320

.

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Really hope this helps! Thankyou!

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