Downhill Manufacturing produces snow skis in a two-step production process - cutting and laminating. The manufacturing center is supported by two service centers - a health clinic and a janitorial service. The following table reveals certain facts about each activity: 

 

A) Using the direct method, I need to allocate the service department costs to production. The clinic costs are to be allocated based on employees, and the janitorial costs are to be allocated based on the square footage.

B) Using the step method, I need to allocate the service department costs to production. The clinic costs are to be allocated based on employees, and the janitorial costs are to be allocated based on the square footage. The first step will be to allocate clinic costs. The clinic employees maintain their space and do not rely upon the janitorial service. However, janitorial employees occasionally sustain an injury and utilize the clinic.

Health Clinic Laminating Department Employees: 15 Square Footage: 8,000 Cost Incurred: $800,000 2 1,200 $180,000 Janitorial Services 4 600 $125,000 Cutting Department 10 12,000 $700,000