Dallas Cleaning

Cost allocations from service departments to producing departments

25-06-2009

Direct cost     # employees           direct labor hrs          sq foot cleaned

personnel         $ 70,000                     6

Admin              $ 90,000                    10

Residential       $ 240,000                   36                   30,000             4,500,000

Commercial      $400,000                   24                   45,000             9,970,000

Create an Excel spreadsheet to allocate costs using the direct method and the step down method. Use the results to answer questions about your findings.

1. What are the total costs for the Residential department using the direct method? What are the total costs for the Commercial department using the direct method?

2. What are the total costs for the Residential department using the step-down method?

3. What are the total costs for the Commercial department using the step-down method?

4. Which method would you recommend that Antonio Cleaning use to allocate their service departments' costs to their producing departments? Why?