Company K has two operating departments, Fabrication and Finishing. In addition, the company has two supporting departments. The Power department provides electricity to all departments, whereas the maintenance department is responsible for the repairs and maintenance work of the entire company. The Power department costs are allocated based on kilowatt hours used. Maintenance department costs are allocated based on the number of internal work orders. The supporting departments' costs are allocated to the operating departments using a single rate.

The data below summarizes the support hours utilized by each department as well as their budgeted variable and fixed costs:

Fabrication

Finishing

Power

Maintenance

Department variable costs

65,000

12,750

400,000

170,000

Department fixed costs

230,000

175,000

1,650,000

420,000

Kilowatt hours

44,000

27,250

-

11,750

Internal work orders

210

160

120

-

Required:

1. Based on the data provided, calculate the total costs of the operating departments, after the allocated supporting departments costs, using:

a. Direct method

b. Step down method with Power department first

2. Provide one strategy for deciding which supporting department to be allocated first.