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:

Required:
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?

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Support Departments Operating Departments Information Eastern Western Engineering Technology Department Department Total Budgeted overhead costs before S300,000 S250,000 S650,000 S920,000 $2,120,000 any interdepartment cost allocations Support work furnished By Engineering Budgeted Engineering salaries Percentage $60,000 30% S50,000 25% S90,000$200,000 100% 45% By Information Technology Budgeted IT service hou Percentage 450 15% 1,500 50% 1,050 35% 3,000 100%