Problem:
Computer Information Services is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Carol Birch, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. Birch assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department. Service Department User Department Info System Facilities** Computer Programming Consulting Training Total Budgeted Overhead $50,000 $25,000 $75,000 $110,000 $85,000 $345,000 Info systems (hours) 400 1,100 600 900 3,000 Facilities (thousand sq. ft.) 200 400 600 800 2,000 *Allocated on the basis of hours of computer usage. **Allocated on the basis of floor space.
Required:
Allocate the service department costs to the user departments using the step method.