Antonio Cleaning provides cleaning services for a variety of clients. The company has two producing departments. Residential and Commercial, two service departments. Personnel andadministrative. The company has decided to allocate all service department costs to the producing departments, personnel onthe basis of number of employees and Administrative on the basis ofdirect department costs. The budget for 20x7 shows:
Personnel Admin. Residential Commercial
Direct department costs $70,000 $90,000 $240,000 $400,000
Number ofemployees 6 10 36 24
Direct-Laborhours 30,000 45,000
Square feetcleaned 4,500,000 9,970,000
1. Allocate service department costs using the direct method.
2. Allocate service department costs using the step-down method. costs should be allowcated first.
3. Suppose the company prices by the hour in the Residential Department and by the square foot cleaned in Commercial. Usingthe results of the step-down allocations in number 2.
a. Compute the cost of providing one direct-labor hour of service in the Residential Department.
b. Compute the cost of cleaning one square foot of space in the Commercial Department.