Dallas Cleaning
Cost allocations from service departments to producing departments
25-06-2009
Direct cost # employees direct labor hrs sq foot cleaned
personnel $ 70,000 6
Admin $ 90,000 10
Residential $ 240,000 36 30,000 4,500,000
Commercial $400,000 24 45,000 9,970,000
Create an Excel spreadsheet to allocate costs using the direct method and the step down method. Use the results to answer questions about your findings.
1. What are the total costs for the Residential department using the direct method? What are the total costs for the Commercial department using the direct method?
2. What are the total costs for the Residential department using the step-down method?
3. What are the total costs for the Commercial department using the step-down method?
4. Which method would you recommend that Antonio Cleaning use to allocate their service departments' costs to their producing departments? Why?