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Week 14: Exercise 2 (Step-Method)
See Exhibit 2 for a diagram of the flow of costs and the sequence in which costs are allocated.
Note: The sequence in which the departments are raked is important. This is because, with the Step-
Method, the costs of a support department are never allocated to a support department above in the
sequence.
What this table shows is there are two Support Departments:
1. Power Department
Provides power in terms of ‘Kilowatt-hours’
Incurred total costs of $250,000
Used 1,000 hours of maintenance time
Used zero Kilowatt-hours of power
2. Maintenance Department:
Provides maintenance services in terms if ‘Maintenance hours’
Incurred total costs of $160,000
Used zero hours of maintenance time
Used 200,000 Kilowatt-hours of power
There are two Producing Departments:
1. Grinding Department
Used 600,000 Kilowatt-hours of power
Used 4,500 hours of maintenance time
2. Assembly Department
Used 200,000 Kilowatt-hours of power
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