Tampa Instrument Company manufactures gauges for construction machinery. The company has two production departments: Machining and Assembly. There are three service departments: Maintenance, Human Resources (HR), and Computer Aided Design (CAD). The usage of these service departments’

output during the year just completed is as follows:

The budgeted costs in Tampa Instrument Company’s service departments during the year are as follows:

Required:
1. Use the direct method to allocate Tampa Instrument Company’s service department costs to its production departments.
2. Determine the proper sequence to use in allocating the firm’s service department costs by the stepdown method.
3. Use the step-down method to allocate the company’s service department costs.
4. Build a spreadsheet: Construct an Excel spreadsheet to solve requirements (1) and (3) above.
Show how the solution will change if the following information changes: the budgeted variable costs in the three departments are $60,000, $70,000, and $55,000, for Human Resources, Maintenance, and CAD, respectively.

Transcribed Image Text:

User of Service HR Maintenance CAD Machining Assembly Total Provision of Service Output (in hours of service) Provider of Service HR Maintenance CAD 500 500 500 4,000 3,500 4,500 5,000 4,000 1,500 10,000 8,000 6,000