Answer (B) is correct . The step-down method allocates service costs to both service and production departments but does not involve reciprocal allocations among service departments. Accordingly, Quality Control will receive no allocation of maintenance costs. The first step is to allocate quality control costs to the Maintenance Department. Maintenance is expected to use 20% (7,000 ¡Â 35,000) of the available quality control hours and will be allocated $70,000 ($350,000 ¡Á 20%) of quality control costs. Thus, total allocable maintenance costs equal $270,000 ($70,000 + $200,000). The Assembly Department is estimated to use 40% (12,000 ¡Â 30,000) of the available maintenance hours. Consequently, it will be allocated maintenance costs of $108,000 ($270,000 ¡Á 40%).
Answer (A) is incorrect because The Assembly Department will be allocated maintenance costs of $108,000.
Answer (C) is incorrect because The Assembly Department will be allocated maintenance costs of $108,000.
Answer (D) is incorrect because The Assembly Department will be allocated maintenance costs of $108,000.
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If Rochester uses the step-down method of allocating service costs beginning with quality control, the maintenance costs allocated to the assembly department would be