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Direct and step methods Salado Inc. provides cleaning services through its Residential and Commercial divisions. Support services of the company are provided by Personnel and Administration areas. Costs of these two areas are allocated to the revenue producing departments. Personnel costs are allocated using number of employees; administration costs are allocated using direct department costs. The following annual budgeted information (presented in a benefits-provided ranking) is available:

	Personnel	Administration	Residential	Commercial
Direct costs	$224,000	$288,000	$768,000	$1,280,000
Number of employees	19	48	115	77
Direct labor hours			96,000	144,000
Square feet cleaned			720,000	912,000

a. Using the direct method, allocate the costs of Personnel and Administration to the Residential and Commercial divisions. Note: Do not round proportions; round your final answer to the nearest whole dollar.

Total support costs allocated to Residential =
Total support costs allocated to Commercial =

b. Using the step method, allocate the costs of Personnel and Administration to the Residential and Commercial divisions. Note: Do not round proportions; round your final answer to the nearest whole dollar.

Total support costs allocated to Residential =
Total support costs allocated to Commercial =

c. Salado prices jobs by the direct labor hour for Residential services and by the square foot cleaned for Commercial services. Compute the full cost of providing one direct labor hour of service for Residential and for one square foot cleaned for Commercial using (1) the direct method and (2) the step method. Note: Round your answers to two decimal places (i.e. round $4.555 to $4.56).

(1) Direct Method
Residential cost per hour of service
Commercial cost per square foot cleaned

(2) Step Method
Residential cost per hour of service
Commercial cost per square foot cleaned

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