STEP DOWN METHOD

Furnishing manufacturing company total overheads allocated and apportioned to the production and service departments as follows:

Assembly $55,000

Finishing 34,000

Maintenance 32,000

Canteen 15,600

A suitable basis for sharing out the maintenance costs is the time spent servicing equipment. The amount of time spent by the maintenance department servicing equipment in the Assembly and Finishing department has been analyses as follows:

Assembly 60%

Finishing 40%

The Canteen departments overheads are to be reapportioned on the basis of the number of employees in the other three departments.

Number of employees:

Assembly 20, finishing 35, Maintenance 15, Canteen 5.

You are required to: reapportion the overhead expenses to the production from the service department. (20 marks)