12-BI Allocation of Service Department Costs; General Framework for Allocation Texas Building Services provides cleaning services for a variety of clients. The company has two producing departments, residential and commercial, and two service departments, personnel and administrative. The company has decided to allocate all service department costs to the producing departments, personnel on the basis of number of employees and administrative costs on the basis of direct department costs. The budget for 20X2 shows the following: Personnel Administrative $100,000 Residential $ 240,000 $70,000 3 5 12 Direct department costs Number of employees Direct-labor hours Square feet cleaned Commercial $ 400,000 18 36,000 9,970,000 24,000 4,500,000 512 PART 4 PRODUCT COSTING 1. Allocate service department costs using the direct method. 2. Allocate service department costs using the step-down method. Personnel costs should be allocated first. 3. Suppose the company prices by the hour in the residential department and by the square foot cleaned in the commercial department. Using the results of the step-down allocations in number 2, a. compute the cost of providing one direct-labor hour of service in the residential department. b. compute the cost of cleaning one square foot of space in the commercial department. 4. Refer to Exhibit 12-1 on page 482. For each type of cost assignment made in number 2 using the step-down method, indicate the assignment type from Exhibit 12-1. 12-BI Allocation of Service Department Costs; General Framework for Allocation Texas Building Services provides cleaning services for a variety of clients. The company has two producing departments, residential and commercial, and two service departments, personnel and administrative. The company has decided to allocate all service department costs to the producing departments, personnel on the basis of number of employees and administrative costs on the basis of direct department costs. The budget for 20X2 shows the following: Personnel Administrative $100,000 Residential $ 240,000 $70,000 3 5 12 Direct department costs Number of employees Direct-labor hours Square feet cleaned Commercial $ 400,000 18 36,000 9,970,000 24,000 4,500,000 512 PART 4 PRODUCT COSTING 1. Allocate service department costs using the direct method. 2. Allocate service department costs using the step-down method. Personnel costs should be allocated first. 3. Suppose the company prices by the hour in the residential department and by the square foot cleaned in the commercial department. Using the results of the step-down allocations in number 2, a. compute the cost of providing one direct-labor hour of service in the residential department. b. compute the cost of cleaning one square foot of space in the commercial department. 4. Refer to Exhibit 12-1 on page 482. For each type of cost assignment made in number 2 using the step-down method, indicate the assignment type from Exhibit 12-1
