LO 7-3

Logan Products has two production departmentsassembly and finishing. These are supported by two service departmentssourcing (purchasing and handling of materials and human resources) and operations (work scheduling, supervision, and inspection). Logan has the following labor hours devoted by each of the service departments to the other departments.

	Total Labor Hours Used by Departments
	Sourcing	Operations	Assembly	Finishing
Sourcing	-	20,000	40,000	60,000
Operations	10,000	-	60,000	50,000

The costs incurred in the plant are as follows:

Departments	Departmental Costs
Sourcing	$ 168,000
Operations	210,000
Assembly	412,000
Finishing	257,000
Total	$ 1,047,000

Required:

1. What are the costs allocated to the two production departments using (a) the direct method, (b) the step method, when the sourcing department that provides the greatest percentage of services to other service departments goes first, and (c) the reciprocal method?

2. What are the total costs in the production departments after allocation?

(For all requirements, do not round intermediate calculations. Round your final answers to nearest whole dollar amount.)