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Seymore Company has two service departments (Cafeteria and Human Resources) and two production...

Question:

Seymore Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows.

Cafeteria 20
Human Resources 30
Machining 100
Assembly 150

Seymore uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Machining? (select one)

$0. $428,572. $444,444. $480,000.

None of the other answers are correct.

(Please show work)

Step Down Method:

The step down method (or step method) is a method used to allocate the cost incurred of a service department to another service department. This method will first allocate the greatest cost to the least cost.

Answer and Explanation:

Answer: $444,444

Let us compute the total number of employees except the number of employees in the human resource department. The total employees...

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Step-Down Method of Cost Allocation

from Accounting 301: Applied Managerial Accounting

Chapter 4 / Lesson 3
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