Spivey Corporation Has Two Service Departments and Two Operating Departments

Essay

Spivey Corporation has two service departments and two operating departments.Budgeted costs and budgeted activity in the various departments for the current year are shown below:
The company uses the step-down method to allocate service department costs to operating departments.The costs of Service Department A are allocated first on the basis of square feet of space occupied.The costs of Service Department B are then allocated on the basis of number of employees in other departments.Predetermined overhead rates in the operating departments are based on machine hours.
Required:
a.Prepare a schedule showing the allocation of service department costs to other departments.
b.Compute the predetermined overhead rate for each operating department.