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The Lots More Store has a Janitorial Department and a Personnel Department that provide services to...

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments. The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated based on employees. The following information is available. Personnel Janitorial Sales Sales Sales Dept Dept #1 #2 #3 Budget $45 000 $30 000 Space (sq m) 4 000 1 000 20 000 30 000 50 000 No. of Employees 5 10 15 45 30 Using the step-down method, calculate the amount of Janitorial Department cost allocated to Sales Department #2, if the Personnel Department is allocated first. Select one: a. $10 247 b. $9 857 c. $8 571 d. $10 350

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Answer #1
Step-down method
Personnel
Department		 Janitorial
Department		 Sales # 1 Sales # 2 Sales # 3
Budgeted Dept. Costs $ 45,000 $ 30,000
Cost Allocation - Personnel Department
(10 : 15 : 45 : 30 ) = 100		 ($ 45,000 ) $ 4,500 $ 6,750 $ 20,250 $ 13,500
Cost Allocation - Janitorial Department
(20 : 30 : 50 ) = 100		 0 ($ 34,500) $ 6,900
( $ 34,500 x 20 /100 )		 $ 10,350
( $ 34,500 x 30 /100 )		 $ 17,250
( $ 34,500 x 50 /100 )
Amount of Janitorial Department cost allocated to Sales Department #2 = $ 10,350
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