Meliodas Inc.

is exploring ways to allocate the cost of service departments such as Quality Control and Maintenance to
the production departments such as Machining and Assembly. The controller of the company has provided the following
information:
QC Maintenance Machining Assembly Total
Budgeted OH costs before allocation P350,000 P200,000 P400,000 P300,000 P1,250,000
Budgeted machine Hrs - - 50,000 - 50,000
Budgeted DL Hrs - - - 25,000 25,000
Budgeted Hrs of service of QC - 7,000 21,000 7,000 35,000
Budgeted Hrs of service of Maintenance 10,000 - 18,000 12,000 40,000

1. Under direct method of allocating service department costs, what are the total service department costs
allocated to the machining and assembly departments respectively?
2. Under step-down method of allocating service department costs from QC to Maintenance, what are the total
service costs allocated to the machining and assembly departments respectively?
3. Under reciprocal method of allocating service department costs, what are the total amount of quality control
costs service costs and total amount of maintenance costs, respectively, to be allocated to the other
departments?

Elizabeth Company has three service departments, Purchasing, Bldg Maintenance and Human Resources, and two
producing departments, Machining and Assembly. The following data have been estimated for next year’s operations:
Department: Total OH Square Machine Estimated Labor No. of
Charges Footage Hours Acquisitions Hours Employees
Purchasing P85,000 200 -- 50,000 -- 3
Human Resources 135,000 300 -- 75,000 -- 5
Bldg Maintenance 100,000 100 -- 35,000 5,000 2
Machining 275,000 1,800 25,000 1,785,000 20,000 15
Assembly 225,000 2,700 1,000 2,105,000 25,000 30

Elizabeth applies overhead to the production using machine hours for Machining and labor hours for assembly.

Compute for the Factory Overhead Rate, assuming the company allocates service department costs using:
1) Direct Method 2) Step Method
If Algebraic method is used in allocating service department cost, compute for the total costs that should have been
charged to:
3) Purchasing, 4) Human Resources, 5) Bldg Maintenance, and 6) Factory Overhead Rates.