Using the same data as in Example 9, assume that the cost of the maintenance department is allocated first. The allocation of service department costs and the calculation of factory overhead rate per direct labor hour under the step method is as follows:

Computations:
Allocation of Department N. Maintenance:

Allocation of Department I, Cafeteria:

Factory overhead rates (based on direct labor hours) for producing departments:

Allocation of Costs Step Method Service Departments Producing Departments N. I, C, Maintenance Cafeteria Machinery K, Assembly Total Cost $12,000 $5,500 $42,000 $78,700 Allocated to Service Dept. and Producing Depts. C and K 1,220 (a) 3,051 (b) 7,729 (c) Subtotal Allocated to Producing $6.720 $45,051 $86.429 Depts. C and K 1,271 (d) 5,449 (e) Balance after Allocation 0 0 $46,322 $91.878 Factory Overhead Rates per $10.294 (f) $ 4.594 (g) direct labor hour