Question
Allie, Inc. has two service departments and two operating departments. Allie allocates service department costs using the step-down method, with the service department with the
Allie, Inc. has two service departments and two operating departments. Allie allocates service department costs using the step-down method, with the service department with the highest cost allocated first. Initial cost for service department 1 was $140,000, and for service department 2, $100,000. Service department 1 is allocated on the basis of department employees, while service department 2 is allocated on the basis of square feet. Cost driver usage is as follows:
Service 1 Service 2 Operating 1 Operating 2
Employees 50 10 20 40
Square Feet 12,000 16,000 22,000 18,000
What are the total service department costs allocated to Operating 2?
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