Explore BrainMass

Explore BrainMass

    Direct and Step Method Cost Accounting

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    4B-1 Direct Method
    Seattle Western University has provided the following data to be used in its service department cost allocations.
    Service Departments Operating Departments
    Administration Facility Undergraduate Graduate
    Services Programs Programs

    Department cost before
    allocations $2,400,000 $1,600,000 $26,800,000 $5,700,000
    Student credit-hours 20,000 5,000
    Space occupied-square feet 25,000 10,000 70,000 30,000

    Required:
    Using the direct method, allocate the costs of the service departments to the two operating departments. Allocate the costs of Administration on the basis of student credit-hours and Facility Services costs on the basis of space occupied.

    4B-2 Step Down Method
    Madison Park Co-op, a whole foods grocery store and gift shop, has provided the following data to be used in its service department cost allocations:

    Service Departments Operating Departments
    Administration Janitorial Groceries Gifts
    Departmental costs
    before allocations $150,000 $40,000 $2,320,000 $950,000
    Employee-hours 320 160 3,100 740
    Space occupied-square hours 250 100 4,000 1,000

    Using the step down method, allocate the costs of the service departments to the two operating departments. Allocate administration first on the basis of employee-hours and than Janitorial on the basis of space occupied.

    © BrainMass Inc. brainmass.com June 3, 2020, 11:41 pm ad1c9bdddf
    https://brainmass.com/business/financial-accounting-bookkeeping/direct-and-step-method-cost-accounting-292727

    Attachments

    Solution Summary

    The solution explains cost allocation using direct and step down methods

    $2.19

    ADVERTISEMENT