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:

Health clinic

Janitorial service

Cutting department

Laminating department

Employees

2

4

10

15

Square footage

1,200

600

12,000

8,000

Cost incurred

$ 180,000

$ 125,000

$ 700,000

$ 800,000

(a)

Using the direct method, 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, 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		Janitorial service		Cutting department		Laminating department
	Cost incurred	$ 180,000		$ 125,000		$ 700,000		$ 800,000
	Clinic allocation	-		-		-		-
	Janitorial allocation	-		-		-		-
	Total cost	$ -		$ -		$ -		$ -
	Clinic allocations:
	Janitorial allocations:
(b)
		Health clinic		Janitorial service		Cutting department		Laminating department
	Cost incurred	$ 180,000		$ 125,000		$ 700,000		$ 800,000
	Clinic allocation	-		-		-		-
	Janitorial allocation	-		-		-		-
	Total cost	$ -		$ -		$ -		$ -
	Clinic allocations:
	Janitorial allocations: