91 of 455

Previous 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 Administration cost
on the basis of student credit-hours and the Facility Services cost on the basis of space occupied. Page 187

EXERCISE 4B–2 Step-Down Method LO4–11

Madison Park Co-op, a whole foods grocery 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 feet 250 100 4,000 1,000

Required:
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 then Janitorial on the basis of space occupied.

EXERCISE 4B–3 Step-Down Method LO4–11

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Ferre Publishing Company has three service departments and two operating departments. Selected data from a recent period on the Download
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