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 each department occupies. The IT departments allocates its cost 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 basis is as follows:
Support Departments Operating Departments
Maintenance IT Wheels Wings Total
Initial Cost $125,000 $80,000 $415,000 $650,000 $1,270,000
Square Feet Occupied 1200 2000 2400 5600 11200
IT Labor hours Used ------- 1000 2850 2150 6000
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 cost 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 to Screamin' Eagles Management. Explain