Question

Aldo Industries, Inc. has two service departments (Human Resources and Building Maintenance) and two production departments (Machining and Assembly). The company allocates Building Maintenance cost on the basis of square footage and believes that Building Maintenance provides more service than Human Resources. The square footage occupied by each department follows.

Human Resources 6,000
Building Maintenance 13,000
Machining 1 8,000
Assembly 26,000

Assuming use of the step-down method, over how many square feet would the Building Maintenance cost be allocated (i.e., spread)?

Answer 1

Answer:

50,000 Square feet

Explanation:

Building maintenance provides more service than human resource and this means the cost of Building maintenance departments would be allocated to all remaining three department including human resource department.

Square feet over which Building Maintenance cost would be allocated = Square Footage of Human Resources + Square Footage of Machining + Square Footage of Assembly

= 6,000 + 18,000 + 26,000

= 50,000