Question

Martina, 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 18,000
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)?

a. 19,000

b. 44,000

c. 50,000

d. 63,000

Answer 1

The correct answer is option (b) 44,000

Step-by-step explanation:

Solution

Given that:

From the question given, the first step to take is to find out how many square feet would the Building Maintenance cost be allocated

Now,

The Square feet over which Building Maintenance cost would be allocated is stated as follows:

The Square feet over which Building Maintenance cost would be allocated = Square Footage of Machining + Square Footage of Assembly = 18000 + 26000

Thus,

=18000 + 26000 = 44,000