Refer to Exercise 8.24.

In exercise 8.24

Cedar Hill Manufacturing produces wooden outdoor furniture. Cedar Hill uses the direct method to allocate service department costs to the production departments. There are two service departments: administration and custodial services, and two production departments: cutting and assembly. Administration costs are allocated based on labour hours, and custodial services costs are allocated based on space occupied.

REQUIRED

A. Using the direct method
1. Allocate the administration costs to the production departments.
2. Allocate the custodial services costs to the production departments.
B. Calculate the total costs (direct plus allocated) for each production department.
C. Calculate a cost per unit produced for cutting and assembly.

Assume instead that Cedar Hill Manufacturing uses the step-down method and allocates administration costs first followed by custodial services costs.

REQUIRED

A. Using the step-down method (round to 2 decimals):
1. Allocate the administration costs to the production departments.
2. Allocate the custodial services costs to the production departments.
B. Calculate the total costs (direct plus allocated) for each production department.
C. Calculate a cost per unit produced for cutting and assembly.

Transcribed Image Text:

Production Departments Assembly $731,000 50,000 30,000 90,000 Custodial Services Administration Cutting Direct costs Labour hours Space occupied (m?) # units produced $160,000 $100,000 10,000 5,000 $345,000 30,000 20,000 50,000 12,000 5,000