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Question - A business has two support departments, maintenance and human resources. Maintenance costs are allocated based on budget maintenance hours. Human resources costs are allocated based on the number of employees in each department. The following data applies for the month:
Support departments Production departments
Maint HR Dept A Dept B
Budget costs $160,000 $40,000 $80,000 $120,000
Budget maintenance hours NA 400 480 320
Number of employees 20 NA 80 240
A. Determine the amount of maintenance costs that should be allocated to Department A using the direct method.
B. Determine the amount of maintenance costs that should be allocated to Department A using the step down method.
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