Question

The Power and Maintenance Departments of a manufacturing company are support departments that provide support to each other as well as to the organization’s two production departments, Plating and Assembly. The manufacturing company employs separate departmental manufacturing overhead rates for the two production departments requiring the allocation of the support department costs to the two manufacturing departments. Square footage of area served is used to allocate the Maintenance Department costs, and percentage of power usage is used to allocate the Power Department costs. Department costs and operating data are as follows:

	Support Departments		Production Departments
Costs:	Power	Maintenance	Plating	Assembly
Labor	$     60,000	$180,000
Overhead	1,440,000	540,000
Total costs	$1,500,000	$720,000
Operating Data:
Square feet	6,000	1,500	6,000	24,000
Percent of usage:
Long-run capacity		5%	60%	35%
Expected actual use		4%	70%	26%

Assume that the manufacturing company employs the step-down allocation method to allocate support department costs. If it allocates the cost of the Maintenance Department first, then the amount of the Maintenance Department’s costs that are directly allocated to the Plating Department would be

$144,000

$120,000

$115,200

$90,000

Answer 1

thus option B is correct

please upvote

thanks