Zenith Home Products has two producing departments, machining and assembly, and two service departments, personnel and custodial. The company’s budget for April 2006 is

Zenith allocates personnel costs on the basis of number of employees and 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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Direct department costs Square metres Number of employees SERVICE DEPARTMENTS PRODUCTION DEPARTMENTS PERSONNEL CUSTODIAL MACHINING ASSEMBLY $32,000 $70,000 $600,000 $800,000 2,000 1,000 10,000 25,000 15 30 200 250