departments' costs (SI, S2, S3, and S4) to the three strategic business units (SBUS). SOVIN Grossman Financial is a regional bank that offers a variety of financial services to both the commercial customers, Grossman uses the step-down allocation method to allocate lot the cost of each of the four service departments and the number of service units used by the vided by service departments are measured in "service units." The following table w P 8-5: Grossman Financial service departments and SBUS: No. of Service Units Used Strategic Bus Units Service Departments Sve Depr SBUT S3 54 SBU2 S2 S/ SB Sve Dept Cost (millions) $3.50 $6.20 $8.30 $4.20 43 6 4.2 SI S2 S3 S4 2 7.2 15 28 4 17 30 39 22 63 40 78 43 22 23 125 52 6 3 2 9 In other words, Service Department S2 used 43 service units provided by S1 and SBU2 me 40 service units of S1. Likewise, SI used 17 service units of S4 and SBUI used 63 units of S4 Required: a. What is the cost per service unit of S1, and what is the cost per service unit of S2 if si is the first service department and S2 is the second department in the step-down order? b. What is the cost per service unit of SI and what is the cost per service unit of S2 if S2 is the first service department and Sl is the second department in the step-down order! c. Describe briefly why the costs per service unit of S1 and S2 vary depending on the step-down allocation order. d. Should Si come before S2 or vice versa in the step-down order? In other words, what factors should management consider in ordering the four departments in the step-down allocation method? and pro- commercial customers. Grossman uses the step-down allocation method to allocate four service Grossman Financial is a regional bank that offers a variety of financial services to both retail departments' costs (SI, S2, S3, and S4) to the three strategic business units (SBU). Services the cost of each of the four service departments and the number of service units used by the other vided by service departments are measured in service units." The following table summarizes P 8-5: Grossman Financial service departments and SBUs: No. of Service Units Used Strategic Bus Units Sve Dept Service Departments Suc Dept SBU2 Cost (millions) SBUT 54 SBU3 S/ 53 S2 43 6 4.2 2 7.2 15 $3.50 $6.20 58.30 $4.20 S2 S3 S4 30 39 22 63 40 78 43 22 28 12.5 52 9 6 17 In other words. Service Department S2 used 43 service units provided by S1 and SBU2 used 40 service units of S1. Likewise, SI used 17 service units of S4 and SBU1 used 63 units of S4, Required: a. What is the cost per service unit of S1, and what is the cost per service unit of S2 if ! is the first service department and S2 is the second department in the step-down order? b. What is the cost per service unit of S1 and what is the cost per service unit of S2 if S2 is the first service department and S1 is the second department in the step-down order! c. Describe briefly why the costs per service unit of S1 and S2 vary depending on the step-down allocation order. d. Should S1 come before S2 or vice versa in the step-down order? In other words, what factors should management consider in ordering the four departments in the step-down allocation method
