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Ilocos Norte Company has 2 service departments, Administration and Maintenance, and 2 operating departments, Department 1 and Department 2 Administration department uses number of
Ilocos Norte Company has 2 service departments, Administration and Maintenance, and 2 operating departments, Department 1 and Department 2 Administration department uses number of employees as the cost driver and Maintenance department uses machine-hours as the cost driver. The following information is provided: SERVICE DEPARTMENTS OPERATING DEPARTMENTS Administration Maintenance 1 2 TOTAL Overhead Cost P 400,000 P 800,000 P 3,200,000 P 3,600,000 P 8,000,000 Number of Employees 200 400 250 150 1,000 Machine Hours used 2,000 1,000 1,500 2,500 7,000 Required: Allocate the service department costs to each operating department using the following methods: 1. Direct allocation 2. Step-down allocation 3. Reciprocal allocation
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