Question: Ben, the accountant, does a break even analysis for Event Planning, and finds that when using the Direct Method for allocating service costs, Tom must plan 21 events to break even. What would happen to the number of break-even events if Ben instead used the Step Down method to Accounting first to allocate the service cost? (Note: assume the pricing and variable costs stay the same, and the amount of service costs allocated to the Sales Department and Event Planning are considered by those departments to be fixed costs).

Entertainment 720 is an entertainment conglomerate, consisting of two departments: Sales Department, headed by Jean-Ralphio, and Event Planning, headed by Tom. Recently, E720 decided to hire an Accountant, Ben. They also have a corporate jet both for Event Planning and Accounting related travel. Jean-Ralphio, for reasons that might be obvious, is not allowed to use the corporate Jet. Ben, having taken a managerial accounting class, decided to investigate the costs and structure associated with the service departments of Entertainment 720, which he decided were his Accounting department (costing $100,000 per year), and the Jet (costing $1,000,000 per year). The departments receive the following percentage of service: Sales Event Planning 140 40% 40% 75% 20% Accounting $100,000 / yr Jet $1,000,000 / yr 25% The service costs are allocated based on the percentages shown. No other costs should be considered for this