Question $2$: $(25$ Marks$)$

Highlight Department Store allocates the Personnel and Payroll Department's costs to the sales departments of Shoes, Automotive, and Clothing. Personnel and Payroll also provide services to each other. Personnel costs are allocated by number of employees, and payroll costs are allocated by gross payroll dollars. Costs and other information for January were as follows:

Personnel Payroll Shoes Automotive Clothing

Current costs $$13,800$ $$6,400$ $$24,400$ $$40,000$ $$31,500$

Gross payroll $$3,000$ $$1,500$ $$5,600$ $$8,700$ $$4,050$

Number of employees $538154$

Required:

Prepare a schedule, which includes the total cost of operating the sales departments for January. Allocate service costs using the step$-$down method with the sequence of allocation based on highest percentage support concept.

i$.$ Show which service department has the highest percentage support costs to select as the initial department to be allocated.

ii$.$ Show your work and allocate the costs to the various sales departments.

Personnel Payroll Shoes Auto Clothing

Current costs $$13,800$ $$6,400$ $$24,400$ $$40,000$ $$31,500$