Explore BrainMass
Share

Explore BrainMass

    Step-Down Method

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

    Using the following example, allocate service center costs to each of the three revenue centers using the step-down method:
    Full-time
    Costs Square Feet Meals Employees

    Service Centers
    Maintenance $ 150,000 ---- 2,500 10
    Dietary 400,000 10,000 ---- 15
    Administrative 600,000 20,000 2,500 10
    Revenue Centers
    Laboratory 600,000 30,000 2,500 20
    Radiology 800,000 40,000 2,500 30
    Nursing 2,000,000 100,000 30,000 50
    $ 4,550,000 200,000 40,000 135

    © BrainMass Inc. brainmass.com October 10, 2019, 3:56 am ad1c9bdddf
    https://brainmass.com/economics/output-and-costs/step-down-method-442364

    Attachments

    Solution Preview

    See Excel and Word attachments.

    The step-down method involves allocating the costs of each service center to the remaining centers (service/revenue) through an allocation method. Once a service center has its costs allocated to the remaining centers it is removed from consideration of future cost allocations.

    In this particular problem the step-down method will proceed as ...

    Solution Summary

    This solution allocates three service centers costs to three revenue centers based on the step-down method.

    $2.19