Russet Company Has Two Service Departments and Two Producing Departments

question 132

Multiple Choice

Russet Company has two Service Departments and two Producing Departments. Budgeted costs and budgeted activity in the various departments for the most recent year are presented below:
$\begin{array} {| l | r | r | r | r | } \hline & \begin{array} { r } \text { Custodial } \\\text { Services }\end{array} & \text { Cafeteria } & \begin{array} { r } \text { Cutting } \\\text { Department }\end{array} & \begin{array} { r } \text { Assembly } \\\text { Department }\end{array} \\\hline \text { Overhead Costs } & \$ 252,000 & \$ 140,000 & \$ 600,000 & \$ 900,000 \\\hline \begin{array} { l } \text { Square Metres of Space } \\\text { Occupied }\end{array} & 1,000 & 2,000 & 8,000 & 10,000 \\\hline \text { Number of Employees } & 20 & 30 & 150 & 200 \\\hline \text { Machine Hour } & & & 40,000 & 60,000 \\\hline\end{array}$ Service Department costs are allocated to Producing Departments with the costs of Custodial Services allocated first on the basis of square metres of space occupied. The costs of the Cafeteria are allocated on the basis of number of employees. Predetermined overhead rates in the Cutting and Assembly departments are based on machine hours. Round all calculations to the nearest dollar.


- Under the step-down method of allocation,what would be the amount of Custodial Services cost allocated to the Assembly Department?

• A) $0.
• B) $120,000.
• C) $126,000.
• D) $140,000.

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