Refer to the data in Exercise 7-12. The company has decided to simplify its method of allocating service costs by switching to the direct method.

Required:

1. Allocate the costs of the support departments to the producing departments us- ing the direct method.

2. Using direct labor hours, compute departmental overhead rates (to the nearest penny). Which rate do you consider more accurate—the one using the recipro- cal method or the one using the direct method? Explain. lop8