Question

Petro-X uses the direct method for allocating both fixed and variable costs from the physical plant and equipment maintenance support departments to operating departments X and Y. The bases for allocation are as follows:

Physical plant:
Fixed costs on the basis of square feet occupied Variable costs on the basis of number of employees
Equipment maintenance:
Fixed costs on the basis of budgeted machine hours Variable costs on the basis of expected maintenance hours Costs for physical plant and equipment maintenance are:


Allocation bases for all four departments are:


REQUIRED
A. Assign the support department costs to departments X and Y using the direct method.
B. Assign the support department costs to departments X and Y using the step-down method with the physical plant costs allocated first.
C. Assign the support department costs to departments X and Y using the step-down method with equipment maintenance costs allocated first.
D. Under the step-down method, what criterion should be used to decide which support department costs to allocatefirst?


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  • CreatedJanuary 26, 2015
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