Reference no: EM13164282

Torrence Company has two support departments (Administration and Janitorial) and three producing departments (Fabricating, Assembly, and Finishing). Costs and activities are as follows:

                                                   Administration       Janitorial       Fabricating        Assembly        Finishing

Direct costs...........................        $50,000              $30,000           $40,000           $50,000           $25,000

Number of employees............                                         10                   30                   40                   20

Square feet...........................           2,000                                     10,000            28,000            15,000

Direct labor hours.................                                                          5,000              6,000              2,000

Administrative services are allocated based on the number of employees; janitorial services are allocated based on square footage. Overhead rates for the three producing departments are based on direct labor hours.

a) Determine the total cost allocation and departmental overhead rate for the producing departments using the direct method. Show your work.

b) Determine the total cost allocation and departmental overhead rate for the producing departments using the step-down method. Show your work.