Reference no: EM131578453

Question -

Quantum currently allocates their repair and utility dollars to their assembly, fabricating, and finishing department using the direct method of service center cost allocation. Repair dollars are allocated using direct labor hours and utility dollars are allocated using square footage.

	DLH Repair	Sq. Ft. Utilities	Assembly	Fabricating	Finishing	Total
Cost	$8,000,000	$10,000,000	$4,000,000	$3,500,000	$4,500,000	$30,000,000
Repair	5,000	15,000	6,000	10,000	9,000	45,000
Utilities	7,000	10,000	25,000	30,000	45,000	117,000

a) Calculate the amounts to be allocated to the production departments using the direct method.

b) Calculate the amounts to be allocated to the production departments using the step method.

c) Write a memo to the President explaining the differences in the results.