Alpha Manufacturing Corporation has two service departments, Custodial Services and Maintenance, and three production departments, Cutting, Milling, and Assembly. The company allocates the cost of Custodial Services on the basis of square footage and Maintenance on the basis of labor-hours. No distinction is made between variable and fixed costs. Budgeted operating data for the year just completed follow:
Required: a. Prepare a schedule to allocate service department costs to the production departments by the direct method.
b. Prepare a schedule to allocate service department costs to the production departments by the step-down method, allocating Custodial Services first.

Question

Alpha Manufacturing Corporation has two service departments, Custodial Services and Maintenance, and three production departments, Cutting, Milling, and Assembly. The company allocates the cost of Custodial Services on the basis of square footage and Maintenance on the basis of labor-hours. No distinction is made between variable and fixed costs. Budgeted operating data for the year just completed follow:
  Required: a. Prepare a schedule to allocate service department costs to the production departments by the direct method.
b. Prepare a schedule to allocate service department costs to the production departments by the step-down method, allocating Custodial Services first.

Quizplus · Accepted Answer

The Answer of Alpha Manufacturing Corporation has two service departments, Custodial Services and Maintenance, and three production departments, Cutting, Milling, and Assembly. The company allocates the cost of Custodial Services on the basis of square footage and Maintenance on the basis of labor-hours. No distinction is made between variable and fixed costs. Budgeted operating data for the year just completed follow:
  Required: a. Prepare a schedule to allocate service department costs to the production departments by the direct method.
b. Prepare a schedule to allocate service department costs to the production departments by the step-down method, allocating Custodial Services first.

Alpha Manufacturing Corporation Has Two Service Departments, Custodial Services and Maintenance