Madison Park Co-op, a whole foods grocery and gift shop, has provided the following data to be used in its service department cost allocations: Service Departments Operating Departments
Administration Janitorial Groceries Gifts
Departmental costs before allocations $200,000       $50,000      $3,850,000    $330,000    
Employee-hours          470             330              2,720             150    
Space occupied square feet          900              1,100            9,100           900  

Required:
Using the step-down method, allocate the costs of the service departments to the two operating departments. Allocate Administration first on the basis of employee-hours and then Janitorial on the basis of space occupied.

Madison Park Co-op

Allocation of Departmental Costs:

                                Service Departments         Operating Departments

                               Administration   Janitorial     Groceries        Gifts

Departmental costs

before allocations   $200,000      $50,000     $3,850,000   $330,000

Administration          -200,000      206,250         1,700,000        93,750

Janitorial                                        -256,250           242,857         13,393

Total costs                     0                    0             $5,792,857     $437,143

Explanation:

a) Data and Calculations:

                                Service Departments             Operating Departments

                               Administration   Janitorial         Groceries        Gifts

Departmental costs

before allocations      $200,000    $50,000     $3,850,000   $330,000  

Employee-hours          470                330              2,720           150

Space occupied

 square feet               900               1,100              9,100          900

Administration costs:

Janitorial = $200,000 * 330/3,200 = $206,250

Groceries = $200,000 * 2,720/3,200 = $1,700,000

Gifts = $200,000 * 150/3,200 = $93,750

Janitorial costs:

Groceries = $256,250 * 2,720/2,870 = $242,857

Gifts = $256,250 * 150/2,870 = $13,393

eds? ederal government or feds