Adam Company Has Two Service Departments,Maintenance and Human Resources Assume the Step-Down Method Is Used to Allocate Service Department

question 93

Multiple Choice

Adam Company has two service departments,Maintenance and Human Resources.Adam Company also has two production departments,Mixing and Finishing.Maintenance costs are allocated based on square footage while Human Resources costs are allocated based on number of employees.The following information has been gathered for the current year:
$\begin{array}{llll}&&\text { Human }\\&\text { Maintenlance }&\text { Resources } & \text { Mixing } & \text { Finishing } \\\text { Direct costs }& \$ 50,400 & \$ 33,600 & \$ 42,000 & \$ 70,000 \\\text { Square footage }&1,600 & 800 & 3,200 & 2,400 \\\text { Number of employees }&16 & 24 & 48 & 64\end{array}$
Assume the step-down method is used to allocate service department costs and the Human Resources Department is allocated first.Then the amount of cost allocated from the Maintenance Department to the Human Resources Department is ________.

• A) $0
• B) $5,040
• C) $6,300
• D) $6,825

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Definitions:

SimQuick

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