[Vanessachy]

Parat College allocates support department costs to its individual schools using the step method. Infor­mation for May is as follows:

Support Departments

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Maintenance Power

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Costs incurred $99,000 $54,000

Services percentages provided to:

Maintenance — 10%

Power 20% —

School of Education 30% 20%

School of Technology 50% 70%

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100% 100%

What is the amount of May support department costs allocated to the School of Education?

Incorrect A. $40,500

B. $42,120

C. $46,100

D. $49,125

answer is C, but I don’t understand where is 16400 coming from? and this is the explanation: Step allocation is the allocation of the costs of each service department in sequence to all departments that receive the service, whether other service departments or production departments. In each step, costs are allocated only to remaining departments such that ultimately all service costs are allocated to production; this method recognizes some of the service rendered from one to another service department.

The School of Education would receive 30% of $99,000, or $29,700, from maintenance. Power would receive 20% of $99,000, or $19,800. After that allocation, the Power Department would have $73,800 ($54,000 + $19,800) to allocate to Education and Technology. Education would receive 2/9 of $73,800, or $16,400 from the Power Department. Therefore, total support department cost allocated to the School of Education is $46,100 ($29,700 from Maintenance and $16,400 from Power).

Far, 64 82
Reg, 60 86
Aud, 74 82
Bec, 70 81
Done done done! I did it!!!
Licensed CPA in MA, issued October 2016

Far 10/26/2015, 64, 1/4/2016, 82
Reg 7/10/2015, 60, 2/27/2016, 86
Aud, 5/9/2016, 74 (ouch), 7/26/2016, I cannot wait to take this test again
Bec, 6/10/2016, 70,9/8 retake

[TrackStar]

This problem needs to be done in an Excel spreadsheet. And I got 22% and this should be allocated to the school of technology and that gives the $16,400 that is then added to the $29,700 to arrive at $46,100. I tried to take a picture to show my work but it didnt seem to work on here. I hope this helps.

"It's not that I'm so smart, it's just that I stay with the problems longer" ~Albert Einstein ~

FAR (04/16/16)-61, (07/23/16)- Becker, Ninja Notes, Ninja MCQs
Reg (09/10/16) Becker, Ninja Notes, Ninja MCQs
AUD (11/05/16) prob. Roger, Ninja Notes, Ninja MCQs
Bec (TBD)

[Vanessachy]

Where is the 22% coming from?

Far, 64 82
Reg, 60 86
Aud, 74 82
Bec, 70 81
Done done done! I did it!!!
Licensed CPA in MA, issued October 2016

Far 10/26/2015, 64, 1/4/2016, 82
Reg 7/10/2015, 60, 2/27/2016, 86
Aud, 5/9/2016, 74 (ouch), 7/26/2016, I cannot wait to take this test again
Bec, 6/10/2016, 70,9/8 retake

[TrackStar]

@Vanessachy it appears that the problem has rounding issues and apparently seems to be rounding up. I noticed this once I complied all the numbers into an excel spreadsheet. I wouldn't stress over it bc once OCD starts to kick in it gets hard to move past it this problem. So as long as you know the concepts you should be fine.

"It's not that I'm so smart, it's just that I stay with the problems longer" ~Albert Einstein ~

FAR (04/16/16)-61, (07/23/16)- Becker, Ninja Notes, Ninja MCQs
Reg (09/10/16) Becker, Ninja Notes, Ninja MCQs
AUD (11/05/16) prob. Roger, Ninja Notes, Ninja MCQs
Bec (TBD)

[Author]

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