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A utility company allocates the cost of its two support departments, Security and Maintenance, to its two production departments, Nuclear Generating and Fossil Generating, using
A utility company allocates the cost of its two support departments, Security and Maintenance, to its two production departments, Nuclear Generating and Fossil Generating, using the stepdown (sequential) allocation method. Because the Security Department serves all departments, its costs are allocated first. The costs are allocated using multiple pools, a procedure commonly referred to as the dualrate method. The variable costs of Security, which amount to $96,000, are allocated according to the number of watch stations that have been implemented. Security's fixed costs of $480,000 are allocated on the basis of the maximum number of work stations provided for in the design of the security system. Data regarding the distribution of watch stations are as follows: Maintenance Nuclear Fossil Act al stat'ons , u ' 2 so 18 implemented Maximum stations in 4 36 24 design As the first step in the sequential allocation, the amount of the Security Department's costs to be allocated to the Nuclear Generating Department is
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