A company has two producing department, one for mechanical (M) products and one for electronic (E) products. The company has three service departments, facility management (FM), receiving and handling (RH), and human resource (HR). The companys main production activity is assembling, from a variety of components purchased. The assembly work for the mechanical products heavily relies on labor force. Its costs depend primarily on the direct-labor hours. On the other hand, the production for the electronic products is highly automated and its costs can be mainly determined by the number of components used in each product. The costs of facility management depend primarily on the space used. The costs of receiving and handling depend primarily on the number of components handled. The costs of human resource depend primarily on the labor hours. Two products, PM1 and PM2, are produced in the mechanical department. Another two products, PE1 and PE2, are produced in the electronic department. The material costs, number of components and labor hours used are listed in the table below. Direct- number direct Materials Cost of components labor hours

PM1 $128 9 3.5 PM2 $143 11 5.5 PE1 $114 21 0.8 PE2 $175 23 1

The companys budget for 2018 has been prepared and listed below. FM RH HR M E Direct department costs (excluding direct materials) FM RH HR M E $120,000 $150,000 $140,000 $835,000 $730,000 Space occupied (ft2) 6,500 2,500 75,000 45,000 Number of product produced 7,500 9,500 Number of components used 10 22 Direct-labor hours 33,750 8,550

Hint: FM is the only service department that its cost is allocated to other service departments. (1) Allocate the costs of service departments using the step-down method. (2) Compute the cost per direct-labor hour in the mechanical department and the cost per component in the electronic department. (3) Compute the cost per unit of the product for all four products