Slovenia Cleaning provides cleaning services for a variety of clients. The company has two producing departments, residential and commercial, and two service departments, personnel and administrative. The company has decided to allocate all service department costs to the producing departments’ personnel on the basis of number of employees and administrative on the basis of direct department costs. The budget for 20X7 shows the following:

1. Allocate service department costs using the direct method.
2. Allocate service department costs using the step-down method. Personnel costs should be allocated first.
3. Suppose the company prices by the hour in the residential department and by the square meter cleaned in commercial. Using the results of the step-down allocations in number 2,

(a). compute the cost of providing 1 direct-labour hour of service in the residential department.

(b). compute the cost of cleaning one square meter of space in the commercial department.
4. Refer to Exhibit 12.1 on p. 520. For each type of cost assignment made in number 2 using the step-down method, indicate the assignment type from Exhibit 12.1.

Exhibit 12.1

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Direct department costs Number of employees Direct-labour hours Square metres cleaned Personnel €70,000 3 Administrative €90,000 5 Residential Commercial €240,000 €400,000 18 36,000 9,970,000 12 24,000 4,500,000