Part III: Calculate allocation from service to line departments using the direct, step, and reciprocal methods for Homestead Inc.

Homestead Pottery Inc. is divided into two operating divisions: pottery and retail.The company allocated power and human resources department costs to each operating division. Power costs are allocated on the basis of the number of machine hours and human resources costs on the basis of the number of employees. No effort is made to seperate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data:

Support Departments Operating Divisions

Power Human Reources Pottery Retail

Overhead Costs $100,000 $205,000 $80,000 $50,000

Machine Hours 2,000 2,000 3,000 5,000

Number of employess 20 60 60 80