Jacksboro Manufacturing, Inc. shows the following estimated operating statistics for this year:

Producing Dept. A budgeted 20,000 machine hours for the year, while Producing Dept. B budgeted 15,000 direct labor hours.

Required:
1. Using the direct method, allocate the service center costs to the producing departments, and calculate overhead rates for each producing department.
2. Using the step method, allocate the service center costs to the producing departments, and calculate overhead rates for each producing department.
Allocate service center costs in the order of utilities, cafeteria, and personnel.
If necessary, round all allocations to producing departments to the nearest dollar.
3. Suppose Producing Dept. A sells its products to the government on a cost-plus basis, while Producing Dept. B sells its products on the open market where the price is determined by supply and demand. Assume the step method of allocation is used and that any ordering of the three service centers is permitted.
How might management decide on the ordering of the service centers? Discuss the ethical issues.

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Service centers: Utilities Cafeteria. Personnel Producing departments: A B Personnel Transactions Processed Number of Employees Space Occupied (Square Feet) 12 10 80 1,000 20 15 200 25 8,000 50 2,000 80 20 900 70,000 600 30,000 Budgeted overhead costs for the year and the cost driver for each department are as follows: Overhead Cost Driver Utilities.. $ 30,000 Square footage Cafeteria Personnel. 20,000 Number of employees 10,000 Producing Dept. A.. 80,000 Number of personnel transactions Machine hours Producing Dept. B 60,000 Direct labor hours