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

question 12

Multiple Choice

Ranft 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 Pediatric. 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. The total Pediatric Department cost after allocations is closest to:

• A) $456,993
• B) $456,904
• C) $409,220
• D) $447,702

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Definitions:

Sarbanes-Oxley

A U.S. federal law established to improve corporate governance, prevent fraudulent financial practices, and protect shareholders from corporate abuses.

Executive Compensation

The total package of benefits, including salary, bonuses, stock options, and other perks, provided to top executives of a company.

Pension Plans

Financial programs that provide income during retirement, funded through contributions from employers, employees, or both.

Corporate Scorekeeping

The practice of monitoring and recording the financial and operational performance indicators of a company.