12-B2 Antonio Cleaning Allocation of Service Department Costs Antonio Cleaning provides cleaning

12-B2 Antonio Cleaning 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 department

costs $70,000 $90,000 $240,000 $400,000

Number of employees 6 10 36 24

Direct-labor hours 30,000 45,000

Square feet cleaned 4,500,000 9,970,000

1. Allocate service department costs using the direct method.

2. Allocate service department costs using the step-down method. Personnel costs should be allocated first.

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 2,

a. 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 SOLUTION