Kevin Company has two service departments - 4815

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Request Description

Kevin Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: 

     Maintenance     Personnel     Mixing     Finishing 

Direct dept. costs     $126,000     $84,000     $105,000     $175,000 

Square footage     800     400     1,600     1,200 

Number of employees     8     12     24     32 

If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Finishing is _____. 

A. $72,000 

B. $31,500 

C. $105,000 

D. $42,000 

 
Solution Description

Kevin Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated