Houa Manufacturing has two support departments: Human Resources and Facilities. Houa has two production departments: Fabrication and Assembly. Actual data for each department is as follows:

Human Resources costs equal $360,000 and are allocated based on the number (#) of Employees. Facilities costs equal $475,000 and are allocated based on Square (Sq.) Feet.

a. Houa is determining the ranking of support department costs for the step-down allocation method and will use the percentage of services rendered to the support departments. Calculate the percentage of support department services rendered to each other and rank the support department to be allocated first when using the step-down method

b. Independent of the answer in part b. and using the step-down method, calculate the allocation of support department costs to the production departments Fabrication and Assembly respectively, allocating the Facilities department first.

c. Why is cost allocation to products within government agencies an important ethical issue?
 

Department Human Resources Facilities Fabrication Assembly # Employees n/a 250 750 1,500 Sq. Feet 801 n/a 5,073 7,476