Meteor Company has two production departments (Finishing and Painting) and three service departments (Maintenance, Computer Support, and Personnel). Service department costs are allocated to production departments using the direct method. Maintenance allocates costs totaling $3,000,000 based on the square footage of space occupied by each production department. Computer Support allocates costs totaling $4,000,000 based on hours of computer support used by each production department. Personnel allocate costs totaling $2,500,000 based on number of employees in each production department. Information for each production department follows.

Required:

a. Calculate the service department costs allocated to each production department.

b. Why do companies allocate service department costs to production departments?

Transcribed Image Text:

Production Number of Employees Square Feet Computer Support Hours Occupied Department Finishing 70 180 250 10,000 30,000 40,000 21,000 39,000 60,000 Painting Total