What is the method of cost allocation


Sauders Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows.

Cafeteria               20

Human Resources 30

Machining             100

Assembly              150

Sauders uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Machining?











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Accounting Basics: What is the method of cost allocation
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