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Question - Pauline's Hospital has two service departments, Administration and Maintenance, and two operating departments, Nursing and Laboratory. Information on annual costs and allocation bases follows:
Service Departments
Operating Departments
Administration
Maintenance
Nursing
Laboratory
Direct costs
P1,200,000
P400,000
P8,000,000
P800,000
Number of square feet
5,000
-
60,000
15,000
Direct labor hours
10,000
40,000
Required -
1. Determine the service department costs allocated to the two operating departments using the direct method.
2. Determine the service department costs allocated to the two operating departments using the step-down method. Allocate the Maintenance department costs first.
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