Torrence Company has two support departments (Administration and Janitorial) and three producing departments (Fabricating, Assembly, and Finishing). Costs and activities are as follows:
Administration Janitorial Fabricating Assembly Finishing
Direct costs........................... $50,000 $30,000 $40,000 $50,000 $25,000
Number of employees............ 10 30 40 20
Square feet........................... 2,000 10,000 28,000 15,000
Direct labor hours................. 5,000 6,000 2,000
Administrative services are allocated based on the number of employees; janitorial services are allocated based on square footage. Overhead rates for the three producing departments are based on direct labor hours.
a) Determine the total cost allocation and departmental overhead rate for the producing departments using the direct method. Show your work.
b) Determine the total cost allocation and departmental overhead rate for the producing departments using the step-down method. Show your work.