$11-60.$ Cost Allocation: Step and Reciprocal Methods

Dunedin Bank has two operating departments $($Retail and Commercial$)$ and three service departments: Operations, Information Technology $($IT$),$ and Transactions. For the last period, the following costs and service department usage ratios were recorded:

Transactions: Transactions $0,$ IT $0,$ Operations $0,$ Retail $70\%,$ Commercial $30\%,$ IT: Transactions $10\%,$ IT $0,$ Operations $20\%,$ Retail $30\%,$ Commercial $40\%,$ Operations: Transactions $60\%,$ IT $0,$ Operations $20\%,$ Retail $30\%,$ Commercial $30\%,$ Direct Cost: Transactions $$240,000,$ IT $$660,000,$ Operations $$1,500,000,$ Rerail $$3,700,000,$ Commercial $$2,250,000$

Allocate the service department costs to the two operating departments using the step method. Allocate IT costs first, followed by Operations, and then Transactions. How does your answer differ from what you obtained in requirement $($a$)?$

$($LO $11-1)$