Cost Allocation Methods 
a. Compare and contrast the direct method, step-down method, and reciprocal method of cost allocation for service department costs. Discuss the advantages and disadvantages of each method.
b. XYZ Corporation has two service departments, Maintenance and Information Technology (IT), and two production departments, Assembly and Finishing. Using the step-down method, allocate the service department costs based on the following information:
•Maintenance costs: $50,000
•IT costs: $70,000
•Allocation sequence: Maintenance first, then IT
•Allocation basis: Maintenance costs allocated based on square footage, IT costs allocated based on the number of employees