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Alpha Manufacturing Corporation has two service departments, Custodial Services and Maintenance, and three production departments, Cutting, Milling,...

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Accounting

Alpha Manufacturing Corporation has two service departments,Custodial Services and Maintenance, and three productiondepartments, Cutting, Milling, and Assembly. The company allocatesthe cost of Custodial Services on the basis of square footage andMaintenance on the basis of labor-hours. No distinction is madebetween variable and fixed costs. Budgeted operating data for theyear just completed follow:

Service DepartmentsProduction Departments
Custodial ServicesMaintenanceCuttingMillingAssembly
Budgeted costs before allocation$69,000$57,000$165,000$120,000$180,000
Square feet47,00065,00010,00044,00026,000
Labor-hours4,0008,0008,000

Required:

a. Prepare a schedule to allocate service department costs tothe production departments by the direct method.

b. Prepare a schedule to allocate service department costs tothe production departments by the step-down method, allocatingCustodial Services first.

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