2. Allocate the service department costs to the operating departments using the step-down method, with Janitorial allocated first.

a. First, set up the chart, including initial costs and fractions. Stop—Check!

b. Next, allocate costs from the first service department. Stop—Check!

c. Next, allocate costs from subsequent service departments. Stop—Check!

d. Finally, find the total allocation to each operating department. Stop—Check!

Mulberry Corporation has two service departments (Janitorial and Human Resources) and two operating departments (Operating A and Operating B). Mulberry allocates Janitorial costs ($40,000 this period) on the basis of square feet, and Human Resources costs ($60,000 this period) on the basis of number of employees. Each department has the following cost allocation base usage:

Transcribed Image Text:

Square Feet Employees Janitorial 1,000 10 Human Resources 2,000 12 Operating A 5,000 20 Operating B 3,000 30