Step by step

Cascade Engineering has two support departments: Purchasing and Maintenance, and two revenue departments: Product Development and Production. All costs are strictly variable. Purchasing allocates costs based on the number of purchase orders, and Maintenance allocates costs based on machine hours. For the month of March, the following information is available:

$\backslash$table$[[,$Support Department,Revenue Departments$],[$Purchasing$,$Maintenance,Product Development,,Production$],[$Direct Costs,$ $52,000,$$ $40,000,$$$,125,000,$$ $137,000],[$Actual Activity:,,,,,$],[$Purchase Orders,,$120,,180,300],[$Machine Hours,$400,,,1,000,1,600]]$

REQUIRED:

Direct Method

a$.$ What is the total cost allocated to Product Development?

b$.$ What is the total cost allocated to Production?

Step Method

Assume the company allocates Purchasing costs first.

a$.$ What is the total cost allocated to Product Development?

b$.$ What is the total cost allocated to Production?

Reciprocal Method $($Algebraic$)$

a$.$ Write the equations used to calculate the total cost of each support department.