Quality Manufacturers Ltd (QML) has three support departments: Equipment Maintenance, Quality Control and Material Handling Department. The company has two departments that are directly engaged in production: The Bending Department and the Welding Department. The usage of the three-support department output is as follows: Service Provider Departments and percentage of their services used by the user departments

Equipment Maintenance Department

-Bending department and Welding department use 30% and 70% of the services, respectively

Quality Control Department

-Equipment Maintenance Department 5%

-Material Handling Department 20%

-Bending Department 25%

-Welding Department 50% Material Handling Department

-Quality Control Department 5%

-Bending Department 35%

-Welding Department 60%

The budgeted costs in the respective departments were as follows:

Support departments:

Equipment maintenance $ 200 000

Quality control 120 000

Material handling 300 000

$ 620 000

Production departments:

Bending $ 600 000

Welding 100 000

$ 700 000

Total overhead costs $ 1 320 000

Required:

Use the Step-down method to allocate the budgeted costs of the Equipment Maintenance, Quality Control and Material Handling to the Bending and Welding Departments. QML allocates the costs of the Quality Control Department first.