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Summary of the Allocation Process. In summary, the total costs in a given production center are the sum of
(a) its direct costs, (b) any indirect costs distributed to it, plus (c) the costs allocated to it from the service centers.
Exhibit 1-2 shows this process schematically, using the service and production centers for Lawncare, Inc.You
should spend a few minutes now reviewing this exhibit and relating it to the discussion that follows so that you can
see how it works. The stepdown method is a little tricky, so be sure you spend enough time to make sure you understand all of its elements.
_________________________________________________________________________________________________________ Exhibit 1-2. THE STEPDOWN PROCEDURE
______________ Direct plus
________ Maintenance Administration (d) Total
_______________ _____________ _______ Maintenance 30,000 Administration 49,425 2,000 (a) 73,575 17,000 (b) 30,250 (e) 120,825 47,000 11,000 (c) 21,175 (f) 79,175 Service
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This document was uploaded on 03/30/2014.
- Spring '14