Reference no: EM131667300

Question: Support-department cost allocations; direct, step-down, and reciprocal methods. Ballantine Corporation has two operating departments: Eastern Department and Western Department. Each of the operating departments uses the services of the company's two support departments: Engineering and Information Technology. Additionally, the Engineering and Information Technology departments use the services of each other. Data concerning the past year are as follows:

1. What are the total overhead costs of the operating departments (Eastern and Western) after the support-department costs of Engineering and Information Technology have been allocated using

(a) the direct method,

(b) the step-down method (allocate Engineering first),

(c) the step-down method (allocate Information Technology first), and

(d) the reciprocal method?

2. Which method would you recommend that Ballantine Corporation use to allocate service-department costs? Why?