Question 1
Under the step-down method, once a support department's costs have been allocated, all subsequent support-department costs are allocated back to it.
◦ true
◦ false
Question 2
Buildz Corp has been servicing the Production Casting Department for five years. Beginning next year, the company is adding a Production Molding Department to compliment the materials produced by the Production Casting Department. As a result, data center costs are expected to increase from $800,000 per year to $1,000,000 per year. The Production Molding Department will use 20% of the data center efforts.
Required:
a. Using the stand-alone cost-allocation method, identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year.
b. Using the incremental cost-allocation method, identify the amount of data center cost that will be allocated to Production Casting and the Production Molding Department next year.
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