Question

Beckett Manufacturing is a contract manufacturer that assembles products for other companies. Beckett has two service departments, Maintenance and Administration, and two operating divisions, Small Components and Large Components. The following data summarize the utilization of each service department:


Square feet of floor space required by each user is the allocation base for allocating the Maintenance department cost of $ 950,000. Number of employees in each department and division is used to al-locate the Administration department cost of $ 567,000. Beckett uses the step- down method of allocating service department costs to the two operating divisions. The $ 950,000 and $ 567,000 amounts represent the operating costs of the Maintenance and Administration departments, respectively, and they do not include any cost allocations from the other service departments.

Required:
a. Allocate the two service department costs to the two operating divisions using the step- down method where Maintenance is the first service department allocated and Administration is the second service department allocated.
b. Allocate the two service department costs to the two operating divisions using the step- down method where Administration is the first service department allocated and Maintenance is the second service department allocated.
c. Calculate the allocated cost per square foot and the allocated cost per employee resulting from using the step- down method where Maintenance is the first service department allocated and Administration is the second service department allocated (as I part [a]).
d. Calculate the allocated cost per square foot and the allocated cost per employee resulting from using the step- down method where Administration is the first service department allocated and Maintenance is the second service department allocated ( as in part [ b ]).
e. Describe why the costs per square foot and the costs per employee vary in parts ( c ) and ( d )above.


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  • CreatedDecember 15, 2014
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