Finkler Legal Services, LLC, Uses the Step-Down Method to Allocate

question 11

Essay

Finkler Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow: Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
-Hodgin Corporation uses the direct method to allocate its two service department costs to its two operating departments. Data concerning those departments follow:
B.
Required:
Allocate the service department costs to the operating departments using the direct method.
Service Department A costs are allocated on the basis of allocation base A and Service Department B costs are allocated on the basis of allocation base

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Definitions:

Accumulated Depreciation

The cumulative sum of depreciation costs charged to a fixed asset from the time of its purchase.

Gain or Loss

The financial result of disposing or selling an asset or investment, measured by the difference between the sale price and the asset's book value.

Equipment

Tangible assets used in the operation of a business to produce goods or provide services, such as machinery, computers, or tools.

Double-declining-balance

An accelerated depreciation method that calculates depreciation at twice the rate of the straight-line method.