Mario & Luigi is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. A pricing analyst in the Accounting Department has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Theanalyst assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department.

Information systems are allocated on the basis of hours of computer usage; facilities are allocated on the basis of floor space.

Required:

A. Allocate the service department costs to the user departments using the step method. Allocate Information Systems first and round to the nearest whole dollar. Provide total user department costs.

B. Allocate the service department costs to the user departments using the direct method.