1. Using the step-down method, where you allocate the costs of the Technology Support department first, what is the amount of total cost (from both service departments) allocated to Sketching?

2. If $10,500 of the Technology Support cost referenced above were fixed and could not be eliminated (i.e $10,500 would remain if you were to outsource all 1,000 hours of Technology Support). Assuming that everything else is the same, what is the maximum hourly rate bid you would accept from a third party? (Note: only consider the costs and factors presented in this problem).

Service Costs/Outsourcing Eagle's Crest Design is an interior design firm that specializes in hotel interior decorating. The design firm consists of two distinct services: Sketching and Installation. There are also support functions for the Eagle's Crest Design that are separated into two departments: Office and Technology Support. Office encompasses all the expenses associated with the office support necessary to run the business. Technology Support includes any expenses associated with the computer systems required to operate the business as well as those used to sketch and install the designs. Cost data for the services and the support functions are as follows: Technology Support $21,000 Office $ 16,000 Sketching $46,695 Installation $60,305 Total $144,000 The Office and Technology Support costs are allocated based on the service hours. The departments receive the following percentage of service hours from the departments: Technology Support Office Sketching Installation Department rendering service Technology Support 15% 45% 40% Office 40% 25% 35%