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Marshall Welding Company has two service departments (Cafeteria and Human Resources) and two production departments (Machining and Assembly). The number of employees in each department follows.
Cafeteria 20
Human Resources 30
Machining 100
Assembly 150
Problem 1: Marshall Welding uses the step-down method of cost allocation and allocates cost on the basis of employees. Human Resources cost amounts to $1,200,000, and the department provides more service to the firm than Cafeteria. How much Human Resources cost would be allocated to Machining?
Option 1: $444,444.
Option 2: $428,572.
Option 3: None of the answers is correct.
Option 4: $480,000.
Option 5: $0.
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