Muckenfuss Clinic Uses the Step-Down Method to Allocate Service Department

question 26

Multiple Choice

Muckenfuss Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT) , and two operating departments, Family Medicine and Geriatric Medicine. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and Information Technology costs are allocated second on the basis of Personnel costs.In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Medicine Department is closest to:

• A) $21,604
• B) $24,096
• C) $45,008
• D) $22,500

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Definitions:

Replace Inventory

The process of replenishing stock to ensure sufficient levels of inventory are maintained for operations.

Acquire Inventory

The process of obtaining goods and materials for sale or use in production by a company.

Estimated Ending Inventory

An approximation of the value or quantity of inventory that a company expects to have at the end of a period, calculated using the cost of goods sold formula.

Gross Profit

The difference between revenue from sales and the cost of goods sold, before accounting for operating expenses.