Exam 14: Period Cost Allocation

What is the cost of the Maintenance Department allocated to Department B using the step-down method if the support department with the highest percentage of interdepartmental service to the other support department is allocated first?

Smith Company and Jones Company currently share an employee dining facility.Jones Company employs fewer people and believes that they should not be required to pay one-half of the $300,000 costs incurred for the facility.An independent consulting firm stipulated that Smith Company could receive the same services for $150,000 while Jones's employees could receive comparable services for $100,000. What will be Jones's allocated cost if the stand-alone method is used?

The manager of the Finishing Department is concerned about how the costs of service departments are being assigned to the Mixing Department.He knows that his department uses support activities entirely different from the other production departments.As a matter of fact,when something goes wrong in the Mixing Department the entire plant has to stop production because of the critical nature of the chemical processing in that department.Several support departments,such as maintenance and clean-up stop whatever they are doing and come to help the Mixing Department.However,it appears that the Mixing Department is not assigned any additional support costs because all support costs are assigned on the basis of actual outputs. Required: Explain the methods available for the allocation of costs from one department to another.Which method would you recommend for this company and why?