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

question 20

Multiple Choice

Prophit 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 Pediatrics. 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 Pediatrics Department cost after allocations is closest to:

• A)$231,638
• B)$223,132
• C)$232,286
• D)$182,936

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Definitions:

Market Effect

The impact of supply, demand, and external factors on the prices and availability of goods and services in a market.

Minimum-Wage Laws

A legal framework that specifies the minimum hourly earnings employers are obliged to pay their staff.

Lowest Wage

The minimum amount of compensation an employer is legally allowed to pay to workers, also known as minimum wage.

Free Market

An economic system where prices for goods and services are determined by the open market and by consumers, with minimal government intervention.