[Anonymous]

I’ve read through the provided answer 3 times, and I still don’t see the logic behind this methodology. Can anyone help?

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

---

---

Costs incurred $99,000 $54,000

Services percentages provided to:

Maintenance — 10%

Power 20% —

School of Education 30% 20%

School of Technology 50% 70%

---

---

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

solution:

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).

[jgmart04]

Bumping this. Anyone have a more simplistic explanation?

Thanks!

[mckan514w]

@ BW2374 think of it like this– you have two different departments that exist exclusively to provide services to the other departments within the college. Meanwhile your power department must also rely on your maintenance department, thus the cost incurred by these departments should be shared by the other departments that benefit from them.

In the case of Maintenance 100% of the cost will be allocated between power, education and technology. The amount that is allocated to power will be added into their already collected cost and then allocated out to the remaining two departments because again it exist for their benefit..

Hope this makes a little more sense..

And they ask me why I drink

BEC 71, 82
AUD 75
REG 75
FAR 61, 69, 83

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[MO]

Step 1: Allocate the department that provides the greatest support. In this case, Maintenance (20% vs 10% or 19,800 vs 5,400).

Edu 29,700 [30% x 99,000]
Tech 49,500 [50% x 99,000]
————-
Total 79,200

Power 54,000 Beginning
Power 19,800 allocated from maintenance [20% x 99,000]
————-
Total 73,800

Step 2: Allocate Power. The distribution percentages are 20%/90% [or 2/9] and 70%/90% [or 7/9] for Edu & Tech, respectively. Maintenance was allocated in Step 1 so there's no Maintenance remaining to allocate to Power, so that 10% is deducted from 100% to come to 90%.

Edu 16,400 [2/9 x 73,800]
Tech 57,400 [7/9 x 73,800]
————-
Total 73,800

Total Allocated:
79,200 + 73,800 = 153,00

Total allocated to Edu:
29,700 + 16,400 = 46,100

Hope that's more clear!

[Jsn3004]

I know i'm late to this problem, but how do they come up with 22 percent?

FAR: Pass
BEC: Pass

[Author]

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