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Samson Enterprises: Allocate costs using the step-down method

Samson Enterprises uses the step-down method to allocate service department costs to revenue-producing departments. The support departments, personnel and janitorial, allocate their costs based on the number of employees and departmental square footage, respectively. Relevant data are presented as follows:

Personnel Janitorial Department 1 Department 2
Employees 7 10 20 25
Square feet 3,000 1,000 10,000 15,000
Direct costs $400,000 $500,000 $1,500,000 $2,000,000

Allocate the personnel and janitorial costs to the revenue-producing departments using the step-down method.

Personnel costs allocated to janitorial ___________
Personnel costs allocated to Department 1 _________
Personnel costs allocated to Department 2 _________
Janitorial costs allocated to Department 1 _________
Janitorial costs allocated to Department 2 _________

Solution Preview

Personnel Janitorial Department 1 Department 2
Employees 7 10 20 25
Square feet 3,000 1,000 ...

Solution Summary

The solution makes the calculations and explains the procedure.

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