Longworth Manufacturing has two producing departments, machining and assembly, and two servicedepartments, personnel and custodial. The company’s budget for April 20X1 is as follows:
Service Departments Production Departments
Personnel Custodial Machining Assembly
Direct department costs $45,000 $70,000 $600,000 $800,000
Square feet 2,000 1,000 10,000 25,000
Number of employees 15 30 200 250
Longworth allocates personnel costs on the basis of number of employees and custodial costs on thebasis of square feet.
Required:
a. Allocate personnel and custodial costs to the producing departments using the direct method.
b. Allocate personnel and custodial costs to the producing departments using the step-down method. Allocate personnel costs first.
Answers: 2
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