Problem 2 (adapted)

YMP Tool has three service departments that support the production area. Outlined below is the estimated overhead by department for the upcoming year.

Service

Departments Estimated Overhead

Receiving P25,000

Repair 35,000

Tool 10,000

Service

Departments Number of Employees

Receiving 2

Repair 2

Tool 1

Production

Departments

Assembly 25

Bottling 12

The Repair Department supports the greatest number of departments, followed by the Tool Department. Overhead cost is allocated to departments based upon the number of employees.

Required:

a. Using the direct method of allocation, how much of the Repair Department's overhead will be allocated to the Tool Department?

b. Using the step-down method of allocation, the allocation from the Repair Department's overhead to the Tool Department would be