15-31 Support-department cost allocations; single-department cost pools; direct, step-down, and reciprocal methods. The Martinez Company has two products. Product 1 is manufactured entirely in department X. Product 2 is manufactured entirely in department Y. To produce these two products, the Martinez Company has two support departments: A (a materials-handling department) and B (a power- generating department) An analysis of the work done by departments A and B in a typical period follows Used b Supplied b 00 1000 600 250 750 1,500 CHAPTER15 ALLOCATION OF SUPPORT-DEPARTMENT COSTS, COMMON COSTS, AND REVENUES The work done in department A is mea sured by the direct labor-hours of materials-handling time. The work done in department B is measured by the kilowatthours of power. The budgeted costs of the support depart ments for the coming year are as follows: Department A Materials Handling)(Power G Department B Variable indirect labor and indirect materials costs Supervision Depreciation S300,000 S 30,000 50,000 100,000 180,000 90,000 30,000 SA20,000 + Power costs Materials-handling costs The budgeted costs of the operating departments for the coming year are $2,500,000 for department X and $1,900,000 for department Y Supervision costs are salary costs. Depreciation in department B is the straight-line depreciation of power-generation equipment in its 19th year of an estimated 25-year useful life; itis old, butwell-maintained, equipment. 1. What are the allocations of costs of support departments A and B to operating departments X and Y using (a) the dire ct method, (b) the step-down method (allocate department A first),(c) the step-down method (allocate department B first), and (d) the reciprocal method? An outside company has offe red to supply all the power needed by the Martinez Company and to pro- vide all the services of the present power department. The cost of this service will be $80 per kilowatt hour of power. Should Martinez accept? Explain Required 2