Vitro Corporation has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. Service Department AService Department BOperating Department XOperating Department YDepartmental costs$31,280$55,640$161,490$399,350Allocation base A 4,000 1,000 26,000 19,000Allocation base B 6,000 2,000 30,000 2,000 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.
What will be an ideal response?
Allocation base for Service Department A costs = 1,000 + 26,000 + 19,000 = 45,000
Allocation base for Service Department B costs = 30,000 + 2,000 = 32,000
| Service Department A | Service Department B | Operating Department X | Operating Department Y | |||||
| Departmental costs | $ | 31,280 | $ | 55,640 | $ | 161,490 | $ | 399,350 |
| Allocation: | ||||||||
| Service Department A costs (1,000/45,000, 26,000/45,000, 19,000/45,000) | (31,280) | 680 | 17,680 | 12,920 | ||||
| Service Department B costs (30,000/32,000, 2,000/32,000) | (56,320) | 52,800 | 3,520 | |||||
| Total costs after allocation | $ | 0 | $ | 0 | $ | 231,970 | $ | 415,790 |
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