Dainels Corporation Uses the Step-Down Method to Allocate Service Department

question 277

Multiple Choice

Dainels Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, General Management and Physical Plant, and two operating departments, Sales and After-Sales. Data concerning those departments follow: General Management Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied. The total After-Sales Department cost after allocations is closest to:

• A) $516,196
• B) $515,880
• C) $503,980
• D) $513,911

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Definitions:

Compounded Quarterly

The process of calculating interest on both the initial principal and accumulated interest over four periods within a year.

Economically Equivalent

A term describing financial items or situations that have the same value or effect when all factors are considered.

Scheduled Payment

A predetermined amount paid at regular intervals under the terms of a loan agreement.

Compounded Semi-annually

An interest calculation method where interest is added to the principal sum twice a year, affecting the total interest earned.