Guna publishing company has three service departments & two operating departments. Selected data from a recent period on five departments as follows:
Cost type
Service Departments
Operating departments
Total
A
B
C
1
2
Overhead costs
$140,000
$105,000
$48,000
$275,000
$430,000
$998,000
Number of employees
60
35
140
315
210
760
Space occupied
15,000
10,000
20,000
40,000
100,000
185,000
Hours of press time
-
30,000
60,000
90,000
The company allocated service department costs by the step method in the following order.
A (number of employees). B (Space occupied), & C (hours of press time). The company makes no distinction between variable & fixed service department costs.
Required:
1) Assuming that the company used the direct method, how much overhead cost would be allocated to each operating departments?
2) Using the step method, allocate the service department costs to the operating departments.
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