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Posted: May 16th, 2020
Allocating service department costs using the step method. Gretsky Company has two service departments
Allocating service department costs using the step method. Gretsky Company has two service departments (maintenance and general factory administration) and two operating departments (cutting and assembly). Management has decided to allocate maintenance costs on the basis of the area in each department and general factory administration costs on the basis of labor hours the employees worked in each of their respective departments.The following data appear in the company records for the current period:.transtutors.com/qimg/oa0z4yimn9u3xsr1.png">General FactoryAdministration Maintenance Cutting AssemblyArea Occupied (square feet)..........................................2,000---2,0006,000Labor Hours .......................................................................---200400600Direct Labor Costs (operating departments only).... Service Department Direct Costs ..................................$2,400$4,800$3,000$8,000Use the step method to allocate service departmentsâ costs to the operating departments, starting with maintenance.
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