A small metropolitan airport has three service centers: Maintenance, Air Traffic Control, and Ground Crew. They provide services to one another as well as to two revenue centers: Commercial Planes and Private Planes. During the fall season, the service and revenue centers generated the following data:

Maintenance had total costs of $150,000, which are assigned on the basis of the number of work orders. Air Traffic Control had total costs of $200,000, which are assigned on the basis of the number of controller minutes. Ground Crew had total costs of $80,000, which are assigned on the basis of the number of passenger seats. Commercial Planes had indirect costs of $100,000, and Private Planes had indirect costs of $50,000. Overhead rates for Commercial Planes and Private Planes are computed on the basis of number of flights.
Required
1. Use the direct method of cost allocation to determine the two revenue centers’ overhead costs.
2. Use the step method of cost allocation to determine the two revenue centers’ overhead costs. Allocate in the order presented: Maintenance, Air Traffic Control, Ground Crew, Commercial Planes, and Private Planes.
3. Prepare departmental overhead rates for Commercial Planes and Private Planes under the direct method of cost allocation.
4. Prepare departmental overhead rates for Commercial Planes and Private Planes under the step method of costallocation.

Transcribed Image Text:

Air Traffic Ground Commercial Private Maintenance Control Crew Planes Planes Number of work orders controller minutes passenger seats I0 30 470 200 Number of Number of Number of flights -2,500 6,500 20 1,000 6,000 80