problem 3

Problem 3: Anderson Steel Anderson Steel has two profit centers: Ingots and Stainless Steel. These profit centers rely on services supplied by two service departments: electricity and water. The profit centers' consumption of the service departments (in millions) is given in the following table: Service provided by Elem-telly (million 111th Water illion allons The total operating costs of the two service departments are: Electricity $120 million, Water $80 Million. Required: a. Service department costs are allocated to profit centers using the stepdown method. Water is the first service department allocated. Allocate the costs and compute the cost per kwh of electricity and cost per gallon of Water. b. Ftepeat the exercise by allocating Electricity rst and compute the cost per Kwh of electricity and cost per gallon of Water. 0. Evaluate the two alternative stepdown methods {in a. and b. above}I from the point of view of the two prot centers (lngots and Stainless Steel)