Problem:
Blondell Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow:
Service Department Operating Department
Personnel IT Family Law Corporate Law
Departmental costs $91,000 $31,000 $885,100 $191,800
Employees 20 30 130 165
PCs 13 29 170 230
Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.
The total Corporate Law Department cost after allocations is closest to:
- $122,000
- $282,800
- $260,655
- $261,905