Calculate the total costs of the operating departments

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Reference no: EM133443848

Question: Company K has two operating departments, Fabrication and Finishing. In addition, the company has two supporting departments. The Power department provides electricity to all departments, whereas the maintenance department is responsible for the repairs and maintenance work of the entire company. The Power department costs are allocated based on kilowatt hours used. Maintenance department costs are allocated based on the number of internal work orders. The supporting departments' costs are allocated to the operating departments using a single rate.

The data below summarizes the support hours utilized by each department as well as their budgeted variable and fixed costs

	Fabrication	Finishing	Power	Maintenance
Department variable costs	65,000	12,750	400,000	170,000
Department fixed costs	230,000	175,000	1,650,000	420,000
Kilowatt hours	44,000	27,250	-	11,750
Internal work orders	210	160	120	-

1. Based on the data provided, calculate the total costs of the operating departments, after the allocated supporting departments' costs, using:

a. Direct method

b. Step down method with Power department first

2. Provide one strategy for deciding which supporting department to be allocated first.

Reference no: EM133443848

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