Downhill Manufacturing produces snow skis in a two-step production process – cutting and laminating.
| Downhill Manufacturing produces snow skis in a two-step production process – cutting and laminating. The manufacturing center is supported by two service centers – a health clinic and a janitorial service. The following table reveals certain facts about each activity: | |||||||||
| Health clinic | Janitorial service | Cutting department | Laminating department | ||||||
| Employees | 2 | 4 | 10 | 15 | |||||
| Square footage | 1,200 | 600 | 12,000 | 8,000 | |||||
| Cost incurred | $ 180,000 | $ 125,000 | $ 700,000 | $ 800,000 | |||||
| (a) | Using the direct method, allocate the service department costs to production. The clinic costs are to be allocated based on employees, and the janitorial costs are to be allocated based on the square footage. |
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