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Allocation: Direct Method and Step down Method Please show work Required: 1) Allocate the personnel and engineering costs...

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Accounting

Allocation: Direct Method and Step down Method

Please show work

Required:
1) Allocate the personnel and engineering costs to theproduction departments using the direct method
2) Allocate the personnel and engineering costs to theproduction departments using the step down method

-company has Two production departments:
processing
assembly

-company also has Two service departments:
personnel
engineering

Company budget for August 2014 is:
Service departments:
Personnel:
direct costs is 64,000
square feet 4,000
# of employees 30
Engineering:
direct costs 140,000
square feet 2000
# of employees 60

Production:
Processing:
direct costs 1,200,000
Square feet 20,000
# of employees 400

Assembly:
direct costs 1,600,000
square feet 50,000
# of employees 500

the firm allocates their personnel costs based on:
# of employees
and
engineering costs based on square feet
column1 personnel
column 2 engineering
column 3 processing
column 4 assembly

Row 1 direct costs
Row 2 square feet
Row 3 # of employees

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Direct Method Personnel Engineering Processing Assembly Total

Direct Costs

    64,000.00    140,000.00    1,200,000.00    1,600,000.00    3,004,000.00

Square Feet

      4,000.00        2,000.00         20,000.00         50,000.00         76,000.00

No. of employees

            30.00              60.00               400.00               500.00               990.00
Allocation
Personnel cost (400:500) (64,000.00)                     -           28,444.44         35,555.56                        -  
Engineering cost (20000:50000)                  -   (140,000.00)         40,000.00       100,000.00                        -  
Total costs                  -                       -   1,268,444.44 1,735,555.56 3,004,000.00
Step Down Method Personnel Engineering Processing Assembly Total

Direct Costs

    64,000.00    140,000.00    1,200,000.00    1,600,000.00    3,004,000.00

Square Feet

      4,000.00        2,000.00         20,000.00         50,000.00         76,000.00

No. of employees

            30.00              60.00               400.00               500.00               990.00
Allocation
Engineering cost (4000:20000:50000)      7,567.57 (140,000.00)         37,837.84         94,594.59                        -  
Total    71,567.57                     -      1,237,837.84    1,694,594.59    3,004,000.00
Personnel cost (400:500) (71,567.57)                     -           31,807.81         39,759.76                        -  
Total costs                  -                       -   1,269,645.65 1,734,354.35 3,004,000.00
Note: As per step down method, service department which has more costs will be allocated first so Engineering department is allocated first.

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