Tampa Instrument Company manufactures gauges for construction machinery. The company has two production departments: Machining and Assembly. There are three service departments: Maintenance, Human Resources (HR), and Computer Aided Design (CAD). The usage of these service departments’ output during the year just completed is as follows:

The budgeted costs in Tampa Instrument Company’s service departments during the year are as follows:

Required:
1. Use the direct method to allocate Tampa Instrument Company’s service department costs to its production departments.
2. Determine the proper sequence to use in allocating the firm’s service department costs by the step- down method.
3. Use the step-down method to allocate the company’s service departmentcosts.

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Provision of Service Output (in hours of service) Provider of Service User of Service HR Maintenance CAD HR Maintenance CAD Machining Assembly Total 500 500 4,000 5,000 10,000 500 3,500 4,000 8,000 4,500 1,500 6,000 CAD HR $ 50,000 200,000 $250,000 Maintenance Variable. Fixed. Total 80,000 50,000 300,000 150,000 $230,000 $350,000