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Cost Allocation from Administration to Assembly

Yamane Corporation, a manufacturer, uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Data concerning those departments follow:
Service Department Operating Department
Administrative Facilities Assembly Finishing
Departmental costs $26,000 $73,500 $110,500 $432,000
Labor hours 4,800 6,000 28,000 18,000
Space occupied 2,700 1,800 39,000 6,000

Administration Department costs are allocated first on the basis of labor hours and Facilities Department costs are allocated second on the basis of space occupied.

In the first step of the allocation, the amount of Administration Department cost allocated to the Assembly Department is closest to:

- $14,500
- $14,000
- $4,500
- $10,800

Solution Summary

This solution calculates the cost allocation for Yamane Corporation within their Administration to their Assembly Department.