The Screamin' Eagles Company makes wheels and wings for ground transport vehicles and drones. In addition...

 

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The Screamin' Eagles Company makes wheels and wings for ground transport vehicles and drones. In addition to the key manufacturing departments, Screamin' Eagles needs two key support services, provided by its Maintenance and IT departments. The Maintenance costs are allocated to other departments based on the square footage of space each department occupies. The IT department allocates its costs to other departments based on the amount of time the IT employees spend assisting the other departments. The cost information of all four departments, along with their usage information for both allocation bases, is as follows. Support Departments Operating Departments Maintenance IT Wheels $125,000 $80,000 $415,000 1,200 2,000 2,400 1,000 2,850 Initial cost Square feet occupied IT labor hours used Wings Totals $650,000 $1,270,000 5.600 2.150 11.200 6,000 Required a. Allocate the support department costs using the direct method to determine the total costs for which each operating department should be accountable. b. Allocate the support department costs using the step method to determine the total costs for which each operating department should be accountable. Rank the support departments based on their original cost. c. Which of the two approaches would you recommend to Screamin' Eagles management? Explain. The Screamin' Eagles Company makes wheels and wings for ground transport vehicles and drones. In addition to the key manufacturing departments, Screamin' Eagles needs two key support services, provided by its Maintenance and IT departments. The Maintenance costs are allocated to other departments based on the square footage of space each department occupies. The IT department allocates its costs to other departments based on the amount of time the IT employees spend assisting the other departments. The cost information of all four departments, along with their usage information for both allocation bases, is as follows. Support Departments Operating Departments Maintenance IT Wheels $125,000 $80,000 $415,000 1,200 2,000 2,400 1,000 2,850 Initial cost Square feet occupied IT labor hours used Wings Totals $650,000 $1,270,000 5.600 2.150 11.200 6,000 Required a. Allocate the support department costs using the direct method to determine the total costs for which each operating department should be accountable. b. Allocate the support department costs using the step method to determine the total costs for which each operating department should be accountable. Rank the support departments based on their original cost. c. Which of the two approaches would you recommend to Screamin' Eagles management? Explain.

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