Butler Home Products has two producing departments, Machining and Assembly, and two service departments, Personnel and Custodial. The company’s budget for April 2012 is

Butler allocates personnel costs on the basis of number of employees. Butler allocates custodial costs on the basis of square metres.

1. Allocate personnel and custodial costs to the producing departments using the direct method.

2. Allocate personnel and custodial costs to the producing departments using the step-down method. Allocate personnel costs first.

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Service Production Departments Personnel Custodial Machining Assembly Departments Direct department $32,000 $70,000 $600,000 $800,000 costs Square metres Number of employees 2,000 1,000 10,000 25,000 200 15 30 250