Reference no: EM133659770

Question: Allocating Service Department Costs. Meteor Company has two production departments (Finishing and Painting) and three service departments (Maintenance, Computer Support, and Personnel). Service department costs are allocated to production departments using the direct method. Maintenance allocates costs totaling $3,000,000 based on the square footage of space occupied by each production department. Computer Support allocates costs totaling $4,000,000 based on hours of computer support used by each production department. Personnel allocates costs totaling $2,500,000 based on number of employees in each production department. Information for each production department follows: Production Department Square Feet Occupied Computer Support Hours Number of Employees Finishing 10,000 21,000 70 Painting 30,000 39,000 180 Total 40,000 60,000 250

Required: Calculate the service department costs allocated to each production department. Why do companies allocate service department costs to production departments?