Southfolk Shipbuilders has two main business lines (Assembly and Repair) and three support departments (Information Technology, Facility and Human Resources). The following financial information from their shipyard the last year is as follows (all amounts in $millions):

Department Name Dept. Type Total Department Costs

IT Support $ 12

Facility Support 88

Human Resources Support 15

Assembly Production 1,400

Repairs Production 1,600

Other Info	Facility	HR	IT	Assembly	Repairs	Total
floor space (m2)	-	200	100	1,500	1,200	3,000
# employees	10	8	25	100	75	218
# computers	10	12	20	20	60	122

Required:

1. Calculate the total overhead costs for each business line including an allocation of Support Department costs using the step-down method. Support department costs are first allocated from the department with the most costs.

2. Besides the Step-down method, identify and briefly explain two other ways discussed in class and in the Horngren textbook in which support department costs can be allocated. Indicate at least one benefits and drawbacks to each approach. (do not calculate – just briefly explain).

Answer rating: 100% (QA)

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