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Maintenance Utilities Overhead costs incurred $115,000 565,000 Service provided to departments Maintenance 15% Utilities 25% Producing-A 25 40 Producing-B 50 45 Totals 100% 100% Required

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Maintenance Utilities Overhead costs incurred $115,000 565,000 Service provided to departments Maintenance 15% Utilities 25% Producing-A 25 40 Producing-B 50 45 Totals 100% 100% Required Use 4 or more decimal places (e.g., 33.33339%) in your calculations. What is the amount of maintenance and utility department costs distributed to producing departments A and B for June using (1) the direct method, (2) the step method (maintenance department first), and (3) the reciprocal method? 7-39 Departmental Cost Allocation Data Performance, a computer software consulting company, has three major [LO 7-3, 7-4] functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst in the accounting department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities: Service Departments Production Departments Information Computer Information Systems Software SystemsFacilities Programming Consulting Training Total Budgeted overhead 580,000 $40,000 $160,000 $190,000 $125,000 $595,000 Information systems 600 1,200 300 900 3,000 (hours) Facilities (square feet) 240 960 600 600 2,400 Required Use 4 or more decimal places (e.g., 33.33339%) in your calculations. 1. Using computer usage time as the application base for the information systems department and square feet of floor space as the application base for the facilities department, apply overhead from these service departments to the production departments, using these three methods. a. Direct method. Step method (both for the information systems department going first and for the facilities department

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