Delta Manufacturing Company Has Two Service Departments, Custodial Services and Maintenance

Essay

Delta Manufacturing Company has two service departments, Custodial Services and Maintenance, and three production departments, Cutting, Milling, and Assembly. Delta allocates the cost of Custodial Services on the basis of square footage and Maintenance on the basis of labor-hours. No distinction is made between variable and fixed costs. Budgeted operating data for the year just completed follow: Required:
a. Prepare a schedule to allocate service department costs to the production departments by the direct method (round all dollar amounts to the nearest whole dollar).
b. Prepare a schedule to allocate service department costs to the production departments by the step-down method, allocating Custodial Services first (round all amounts to the nearest whole dollar).