Question

Tampa Instrument Company manufactures gauges for construction machinery. The company has two production departments: Machining and Assembly. There are three service departments: Maintenance, Human Resources (HR), and Computer Aided Design (CAD). The usage of these service departments’ output during the year just completed is as follows

Provision of Service Output (in hours of service)
		Provider of Service
User of Service	HR				Maintenance				CAD
HR		—				—				—
Maintenance		1,000				—				—
CAD		1,000				1,000				—
Machining		2,000				2,500				4,000
Assembly		4,000				3,500				2,000
Total		8,000				7,000				6,000

The budgeted costs in Tampa Instrument Company’s service departments during the year are as follows:

	HR				Maintenance				CAD
Variable	$	66,000			$	89,000			$	66,000
Fixed		280,000				192,500				390,000
Total	$	346,000			$	281,500			$	456,000

When Tampa Instrument Company established its service departments, the following long-run needs were anticipated.

Long-Run Service Needs (in hours of service)
		Provider of Service
User of Service	HR				Maintenance				CAD
HR		—				—				—
Maintenance		500				—				—
CAD		2,000				1,000				—
Machining		2,500				3,500				4,800
Assembly		3,000				2,500				1,200
Total		8,000				7,000				6,000

Required:

Use dual cost allocation in conjunction with each of the following methods to allocate Tampa Instrument Company’s service department costs: (1) direct method and (2) step-down method.

1. 1. Direct method combined with dual allocation.
2. a. Variable costs
3. b. Fixed costs
4. c. Total costs allocated

Direct method combined with dual allocation for variable costs. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

	Production Departments Provider of Service   Machining Assembly HR Maintenance CAD Total variable cost $0 $0

Direct method combined with dual allocation for fixed costs. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

	Production Departments Provider of Service Machining Assembly HR Maintenance CAD Total fixed cost $0 $0

Direct method combined with dual allocation for total costs allocated. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

	Machining Assembly Variable costs Fixed costs Total costs $0 $0

Answer 1

Direct Method: