This problem illustrates how costs of two corporate support departments are allocated to operating divisions using the dual-rate method. Fixed costs are allocated using budgeted costs and budgeted hours used by other departments. Variable costs are allocated using actual costs and actual hours used by other departments. Computer Horizons reports the following budgeted and actual amounts for its two central corporate support departments (legal and personnel) that support each other and two manufacturing divisions: the laptop division (LTD) and the work station division (WSD):

Required:

What amount of support-department costs for legal and personnel will be allocated to LTD and WSD using 

(1) The direct method 

(2) The step-down method (allocating the legal department costs first)

(3) The reciprocal method using linear equations?

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1 Home Insert A (Percentages) Personnel (hours) (Percentages) Page Layout 2 3 BUDGETED USAGE 4 Legal (hours) 5 6 7 8 9 ACTUAL USAGE 10 Legal (hours) 11 (Percentages) 12 Personnel (hours) 13 (Percentages) 14 Budgeted fixed overhead costs before any 15 interdepartment cost allocations 16 Actual variable overhead costs before any interdepartment cost allocations 17 Formulas B Data SUPPORT Legal Personnel Department Department 2,500 5% 2,000 5% Review $360,000 $200,000 250 10% - 400 20% $475,000 $600,000 View D E OPERATING LTD 1,500 60% 22,500 45% F 400 20% 26,600 66.5% WSD 750 30% 25,000 50% 1,200 60% 11,400 28.5% G Total 2,500 100% 50,000 100% 2,000 100% 40,000 100% $835,000 $800,000