(Step method) Leander Mfg. has three support departments (human resources, administration, and maintenance) and two revenue-generating departments (assembly and finishing). The company uses the step method to allocate support department costs to operating departments. In October 2010, human resources incurred $360,000 of costs, administration incurred $558,000, and maintenance incurred $170,000.Proportions of services provided to other departments for October 2010 follow.
Human Resources
Administration
Maintenance
Human resources
10%
5%
15
10
Assembly
40
50
45
Finishing
35
30
a. Assuming that the departments are listed in a benefits-provided ranking, what amount of cost should be assigned from human resources to each of the other departments? From administration? From maintenance?
b. What total support department cost was assigned to assembly in October? To finishing?
c. Explain why the cost allocation is affected by the order in which costs are assigned.
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