8.17 Direct and step-down methods with dual rates Petro-X uses the direct method for allocating both fixed and variable costs from the physical plant and equipment maintenance support depart- ments to operating departments X and Y. The bases for allocation are as follows: Physical plant: Equipment maintenance: Fixed costs on the basis of square feet occupied Variable costs on the basis of number of employees: Fixed costs on the basis of budgeted machine hours Variable costs on the basis of expected maintenance hours Costs for physical plant and equipment maintenance are: REQUIRED: Physical Plant Fixed costs Variable costs $39,000 $18,000 Allocation bases for all four departments are: Equipment Maintenance $75,000 $60,000 Support Operating Equipment Physical Plant Maintenance. Department X Department Y Square feet 1,600 3,900 5,000 8,000 Number of employees 10 12 40 50 Budgeted machine hours 0 100 10,000 15,000 Budgeted maintenance hours 10 20 200 400 A. Assign the support department costs to departments X and Y using the direct method. B. Assign the support department costs to departments X and Y using the step-down method with the physical plant costs allocated first. C. Assign the support department costs to departments X and Y using the step-down method with equipment maintenance costs allocated first. D. Under the step-down method, what criterion should be used to decide which support de- partment costs to allocate first?