# The Bayview Resort has three operating departments—the Convention Center, Food Services, and

Question
The Bayview Resort has three operating departments—the Convention Center, Food Services, and Guest Lodging—that are supported by three service departments General Administration, Cost Accounting, and Laundry. For billing and management control purposes, the resort manager wants to calculate each operating department’s direct costs plus its allocated share of service department costs. The company uses the step-down method of service department cost allocation beginning with the General Administration Department, followed by Cost Accounting, and Laundry. The allocation bases for each department are as follows:                                                                     Allocation Base General Administration: Fixed costs . . . . . . . . . . . Long-run average number of employees Cost Accounting: Variable costs . . . . . . . . Number of transactions processed each period Fixed costs . . . . . . . . . . Percentage of peak-period transaction processing needs Laundry: Variable costs . . . . . . . . Pounds of laundry washed each period Fixed . . . . . . . . . . . . . . .  Percentage of peak-period laundry washing needs The following additional data is available for a recent quarter: 1. Using the step-down method, allocate the service department variable costs to the operating departments. What is the total amount of direct and allocated variable costs within each operating department? 2. Using the step-down method, allocate the service department fixed costs to the operating departments. What is the total amount of direct and allocated fixed costs within each operating department? 3. Calculate each operating department’s total direct and allocated variable costs plus its total direct and allocated fixed costs.

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