Asked by Chasity Fields on Jun 17, 2024
Verified
Vitro Corporation has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y.
The company uses the step-down method to allocate service department costs to operating departments. Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B.Required:Allocate the service department costs to the operating departments using the step-down method.
Step-Down Method
An allocation technique used in cost accounting to distribute overhead costs among various cost centers or departments with multiple service departments.
Operating Department Y
A specific division within an organization that is focused on core operational tasks related to producing goods or services.
- Gain an understanding of the methods used for service department cost distribution.
- Gain insights into the application of the step-down technique for the apportionment of service department costs.
- Analyze the impact of different allocation bases on the distribution of service department costs.
Verified Answer
Allocation base for Service Department B costs = 30,000 + 2,000 = 32,000
Learning Objectives
- Gain an understanding of the methods used for service department cost distribution.
- Gain insights into the application of the step-down technique for the apportionment of service department costs.
- Analyze the impact of different allocation bases on the distribution of service department costs.
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