Exercise 4B-2 Step-Down Method [LO4-11]

Madison Park Co-op, a whole foods grocery and gift shop, has provided the following data to be used in its service department cost allocations:

	Service Departments		Operating Departments
	Administration	Janitorial	Groceries	Gifts
Departmental costs before allocations	$ 200,000	$ 60,000	$ 3,850,000	$ 340,000
Employee-hours	480	350	2,690	160
Space occupiedsquare feet	1,000	1,200	9,400	600

Required:

Using the step-down method, allocate the costs of the service departments to the two operating departments. Allocate Administration first on the basis of employee-hours and then Janitorial on the basis of space occupied. (Please enter allocations from a department as negative and allocations to a department as positive. The line should add across to zero. Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

	Service Departments			Operating Departments
	Administration	Janitorial		Groceries	Gifts	Total
Departmental costs before allocations	$200,000	$60,000		$3,850,000	$340,000	$4,450,000
Allocation:
Administration costs	(200,000)
Janitorial costs
Total costs after allocation	$0	$60,000		$3,850,000	$340,000	$4,250,000