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On the other hand both fixed and step function costs

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Unformatted text preview: example, the $1,160,000 in the maintenance department includes the $200,000 of depreciation. Assignment 1. Allocate the service center costs to production centers using the stepdown method, and determine the relevant total costs. Begin with the maintenance department. 2. To what use would you put this information? Please be specific: what are the next steps you would take based on this information? ____________________________________________________________________________________________________________ David W. Young • Management Accounting for Managers • Chapter 1 Page 22 Copyrighted Material. Do not reproduce without written permission. Appendix. The Reciprocal Method of Cost Allocation To see how the reciprocal allocation method works, let’s assume that we wish to allocate an overnight mail delivery company’s two service center costs of maintenance and administration to its two production centers: nextday delivery and two-day delivery. Management has decided to allocate maintenance costs on the basis of the square footage in each department, and administration costs on the basis of the number of hours worked by the employees in each of their...
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