Service department cost allocation, direct method (Appendix) San Miguel LO 8 Company has two production departments, assembly and finishing, and two service departments, machine setup and inspection. Machine setup costs are allocated on the basis of number of setups while inspection costs are allocated on the basis of number of direct labor hours. Selected information on the four departments follows:

REQUIRED

(a) Using the direct method, determine the amount of machine setup costs allo¬ cated to the two production departments.

(b) Using the direct method, determine the amount of inspection costs allocated to the two production departments.

ITEM DIRECT COSTS NUMBER OF DIRECT LABOR SETUPS HOURS Machine setup $40,000 0 0 Inspection 15,000 0 0 Assembly 25,000 300 200 Finishing 20,000 100 500