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Micro Brew Manufacturing Company has two Service Departments-Custodial Services and Maintenance-and three Production Departments-Brewing, Bottling,...

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Accounting

Micro Brew Manufacturing Company has two Service Departments-Custodial Services and Maintenance-and three Production Departments-Brewing, Bottling, and Packaging. Micro Brew allocates the cost of Custodial Services on the basis of square metres and Maintenance on the basis of labour hours. Budgeted operating data for the year just completed follow:

Service Departments Operating Departments
Custodial Maintenance Brewing Bottling Packaging
Budgeted costs before allocation $18,000 $8,000 $80,000 $50,000 $90,000
Square metres 1,000 10,000 5,000 22,000 13,000
Labour-hours - - 4,000 8,000 8,000

Required:

  1. Prepare a schedule, which allocates Service Department costs to the Production Departments by the direct method.
  2. Prepare a schedule, which allocates Service Department costs to the Production Departments by the step-down method, allocating Custodial Services first.

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