prophit clinic uses the step - down method to allocate service department costs to operating departments…

prophit clinic uses the step - down method to allocate service department costs to operating departments. the clinic has two service departments, personnel and information technology (it), and two operating departments, family medicine and pediatrics. data concerning those departments are presented in the chart below.\n\npersonnel costs are allocated first on the basis of employees and it costs are allocated second on the basis of pcs. the total pediatrics department cost after allocations is closest to which value?\n\na) $223,132\n\nb) $232,286\n\nc) $182,936\n\nd) $231,638

prophit clinic uses the step - down method to allocate service department costs to operating departments. the clinic has two service departments, personnel and information technology (it), and two operating departments, family medicine and pediatrics. data concerning those departments are presented in the chart below.\n\npersonnel costs are allocated first on the basis of employees and it costs are allocated second on the basis of pcs. the total pediatrics department cost after allocations is closest to which value?\n\na) $223,132\n\nb) $232,286\n\nc) $182,936\n\nd) $231,638

Answer

Explanation:

Step1: Allocate Personnel costs

First, find the proportion of employees for Pediatrics in the total non - Personnel employees. The total number of non - Personnel employees is (23 + 106+175=304). The proportion of Pediatrics employees is (\frac{175}{304}). The Personnel cost is (C_{P}=85728). The amount of Personnel cost allocated to Pediatrics is (85728\times\frac{175}{304}). [85728\times\frac{175}{304}=\frac{85728\times175}{304}=49275] The new IT cost is (21598 + 85728\times\frac{23}{304}) [85728\times\frac{23}{304}=\frac{85728\times23}{304}=6477] New IT cost (C_{IT}=21598 + 6477=28075)

Step2: Allocate IT costs

Find the proportion of PCs for Pediatrics in the total non - IT PCs. The total number of non - IT PCs is (66 + 172=238). The proportion of Pediatrics PCs is (\frac{172}{238}). The amount of IT cost allocated to Pediatrics is (28075\times\frac{172}{238}) [28075\times\frac{172}{238}=\frac{28075\times172}{238}=20313]

Step3: Calculate the total Pediatrics cost

The original Pediatrics cost is (162640). The total Pediatrics cost after allocations is (162640+49275 + 20313) [162640+49275+20313=232228\approx232286]

Answer:

B. $232,286