12-B2. Allocation of Service Department Costs :Antonio Cleaning provides cleaning services for a variety of clients.
The company has two producing departments Residential and Commercial
and two service departments Personnel and Administrative. The company
has decided to allocate all service department costs to the producing
departments-Personnel on the basis of number of employees and
Administrative on the basis of direct department costs. The budget for
20X7 shows Personnel Administrative Residential Commercial Direct
departmentcosts $70000 $90000 $240000 $400000Number of employees 6 10 36 24Direct-labor hours 30000 45000Square feet cleaned 4500000 99700001. Allocate service department costs using the direct method.2. Allocate service department costs using the step-down method. Personnel costs should be allocatedfirst.3.Suppose the company prices by the hour in the
Residential Department and by the square foot cleaned in Commercial.
Using the results of the step-down allocations in number 2a. Compute the cost of providing one direct-labor hour of service in the Residential Department.b.Compute the cost of cleaning one square foot of space in the Commercial Department.