205 Transfer Case

[alt76]

I have a 1979 Chevrolet 3/4 ton with a 350 and I'm working on a 205 transfer case and I wanted to know the following.....

On the rear output shaft should there be any slack in it because in my case, both the transmission and transfer case I can grab the shaft and pull it in and out about a 1/4 of an inch...is that good or does it mean the bearing has gone bad?

I have watched countless youtube videos and what not, but sure could use answer to this so I know what to do next (as far as part ordering and tools).

Thanks