I think I got the answer to my question. In short, the 2nd way that I have shown above is the preferred method to define the service department to allocate first
Please watch the video from 0:33
https://www.youtube.com/watch?v=e7a4VYtbJ1M------------------------------
Phuc
------------------------------
Original Message:
Sent: 09-24-2021 06:51 AM
From: PRABHU KATTARAMALA
Subject: 1D Step-down allocation method
sorry, i added $3200 instead of $32000
------------------------------
PRABHU KATTARAMALA
Controller
IRUNGATTUKOTTAI TN
India
Original Message:
Sent: 09-23-2021 12:50 PM
From: Phuc Ngo Mai Thien
Subject: 1D Step-down allocation method
Hello everyone,
I get from the material that the Step-down method will start to allocate the cost of the service department that provides more percentage of its service to other service departments.
Take the following example. Could anyone please tell me how calculation should be made to choose the first service cost to allocate?
| | | Service Dept | | Operating Dept | Total |
| | | Maintain | Admin | | 1 | 2 | |
| | Costs | $8,000 | $4,000 | | $32,000 | $36,000 | $80,000 |
| | Machine-hours used | 1,000 | 2,000 | | 1,500 | 2,500 | 7,000 |
| | Number of Employees | 250 | 150 | | 150 | 150 | 700 |
| | | | | | | | |
| | 1st way | | | | | | |
| | %Machine-hours used | 14% | 29% | | 21% | 36% | 100% |
| | %Number of Employees | 36% | 21% | | 21% | 21% | 100% |
| → Admin cost to be allocated firstly as Admin dept. ("AD") provides more %service (36%) to Maintenance dept. ("MD"). than MD provides (29%) to AD |
|
| | | | | | | | |
| | 2nd way | | | | | | |
| | %Machine-hours used | | 33% | | 33% | 33% | 100% |
| | %Number of Employees | 45% | | | 27% | 27% | 100% |
| → Admin cost to be allocated firstly as Admin dept. provides more %service (45%) to Maintenance dept. than MD provides (33%) to AD |
|
| | | | | | | | |
| | 3rd way | | | | | | |
| | %Machine-hours used | 33% | 67% | | | | 100% |
| | %Number of Employees | 63% | 38% | | | | 100% |
| → Maintenance cost to be allocated firstly as Maintenance dept. provides more %service (67%) to Admin dept. than AD provides (63%) to MD |
|
Thank you in advance,