1. What would happen to the amount of service cost allocated to the Sales Department if the service costs were allocated using the Step Down method to accounting first, compared to using the direct method?

A. Allocated amount would increase (compared to Direct Method)

B. Allocated amount would decrease (compared to Direct Method)

C. Allocated amount would remain the same (compared to Direct Method)

2. What would happen to the amount of service cost allocated to the Sales Department if the service costs were allocated using the Step Down method to Jet first, compared to using the direct method?

A. Allocated amount would increase (compared to Direct Method)

B. Allocated amount would decrease (compared to Direct Method)

C. Allocated amount would remain the same (compared to Direct Method)

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