Allocating service department costs using the step method. Johnson & Jackson Company has two service departments (maintenance and general factory administration)

and two operating departments (cutting and assembly). Management has decided to allocate maintenance costs on the basis of the area in each department and general factory administration costs on the basis of labor hours the employees worked in each of their respective departments.

The following data appear in the company records for the current period:

Use the step method to allocate service departments' costs to the operating departments, starting with maintenance.

Transcribed Image Text:

Area Occupied (square feet) Labor Hours Direct Labor Costs (operating departments only) Service Department Direct Costs General Factory Administration Maintenance Cutting Assembly 2.000 2.000 6.000 200 200 800 $3,000 $8,000 $2,400 $4.800