Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 34

Departmental Cost Allocation

Lempicke Corporation distributes its service department overhead costs to product departments. This information is for the month of June:

	Service Departments
	Maintenance	Utilities
Overhead costs incurred	$60,000	$16,000
Service provided to departments
Maintenance	—	10%
Utilities	30%	—
Producing- A	30	45
Producing- B	40	45
Totals	100%	100%

Required What is the amount of maintenance and utility department costs distributed to producing departments A and B for June using (1) the direct method, (2) the step method, and (3) the reciprocal method?