Problem 1 (25 points). The Chilliwack Corporation is in the process of budgeting its manufacturing overhead for the upcoming year. One of the areas that it needs to budget for is service department costs that are used by production departments. The company has identified three service departments for which costs should be allocated: Equipment Maintenance, Cafeteria, and Building Maintenance. These are to be allocated to the three production departments that are involved in the manufacture of its products: Cutting, Assembling, and Finishing. Equipment maintenance costs are to be allocated using the dollar value of equipment that each department is responsible for, cafeteria costs are to be allocated based on the number of employees in each department, and building maintenance costs are to be allocated based on the number of square feet occupied by each department. Information concerning these allocation bases is attached. The direct costs of the service departments are as follows: Equipment Maintenance, $660,000: Cafeteria, $180,000; and Building Maintenance, $700,000. After the service department costs are allocated, the company will calculate predetermined rates to allow the production departments to apply service department costs to production. The Cutting Department will use machine hours to allocate its budgeted costs, the Assembling Department will use direct materials costs to allocate its budgeted costs, and the Finishing Department will use direct labor hours to allocate its budgeted costs. Cutting is expected to use 50,000 machine hours during the year, Assembling is expected to use $1,000,000 of direct materials during the year, and Finishing is expected to use 200,000 direct labor hours during the year. REQUIRED: (1) (2) (3) Allocate the service department costs to the production departments using the direct method. Round all allocation rates to five decimal places and all allocation amounts to the nearest whole dollar. Show supporting calculations for your work. Using your allocation results from (1) above, calculate the predetermined rates that each department should use to allocate its budgeted share of service department costs to production. Round allocation rates to four decimal places. Allocate the service department costs to the production departments using the step method. Show how you determined the sequence in which you allocated the service departments. Round all allocation rates to five decimal places and all allocation amounts to the nearest whole dollar. Show supporting calculations for your work. Using your allocation results from (3) above, calculate the predetermined rates that each department should use to allocate its budgeted share of service department costs to production. Round allocation rates to four decimal places. (4) CHILLIWACK CORPORATION INFORMATION ABOUT ALLOCATION BASES FOR ALLOCATING SERVICE DEPARTMENT COSTS FOR UPCOMING YEAR Dollar Value Number of Square Feet Department of Equipment Employees Occupied Equipment Maintenance $ 40,000 25 2,500 Cafeteria 50,000 10 4.500 Building Maintenance 30,000 40 3,000 Cutting 500,000 50 8,000 Assembling 320,000 150 25,000 Finishing 200,000 135 10,000