762 Chapter 17 Allocation of Support Activity Costs and Joint Costs Required: Use dual cost allocation in conjunction with each of the following methods to allocate Tampa Instrument Company's service department costs: (1) direct method and (2) step-down method. Problem 17-26 Service Department Cost Celestial Artistry Company is developing departmental overhead rates based on direct-labor hours Allocation for its two production departments, Etching and Finishing. The Etching Department employs (LO 17-1) 20 people and the Finishing Department employs 80 people. Each person in these two departments works 2,000 hours per year. The production-related overhead costs for the Etching Department are 1. Overhead rate per hour, budgeted at $200,000, and the Finishing Department costs are budgeted at $320,000. Two service etching: $10.602 (rounded) departments, Maintenance and Computing, directly support the two production departments. These 2. Maintenance department service departments have budgeted costs of $48,000 and $250,000, respectively. The production costs allocated to finishing: departments' overhead rates cannot be determined until the service departments' costs are allo- $87, 111 cated. The following schedule reflects the use of the Maintenance Department's and Computing Ex Department's output by the various departments. Using Department Service Department Maintenance Computing Etching Finishing Maintenance (maintenance hours) 0 1,000 1,000 8,000 Computing (minutes) .. 240,000 840,000 120,000 Required: 1. Use the direct method to allocate service department costs. Calculate the overhead rates per direct- labor hour for the Etching Department and the Finishing Department. 2. Use the step-down method to allocate service department costs. Allocate the Computing Depart- ment's costs first. Calculate the overhead rates per direct-labor hour for the Etching Department and the Finishing Department. (CMA, adapted)