8.40 Step-Down and Reciprocal Methods, Uncertainties, Pricing Howard Inc, manufactures two types of skateboards LO2, L04, in two different departments: a basic board and an exclusive model. The plant is highly automated and contains LO5, L07 only two other departments: (1) engineering and design and (2) information systems. Howard's allocates support department costs according to estimated service use. Estimated information for next year is as follows: Support Departments Operating Departments Engineering Information Exclusive and Design Systems Basic Board Model Direct costs $10.500 $120,000 $150,000 $300.000 Services used Engineering and design 10% 20% 70% Information systems 20% 30% 50% Production volume 120.000 60,000 Total allocated costs are assigned to individual units using the production volume. REQUIRED A. Determine the estimated total allocated costs for the operating departments using the step-down method. B. Determine the estimated total allocated cost per unit of the basic skateboard and the exclusive skateboard using the step-down method, allocating the department with the largest direct costs first. C. Explain why actual total allocated costs will turn out to be different from the estimated total allocated costs. D. Determine the estimated total allocated costs for the operating departments using the reciprocal method. Use either simultaneous equations or Excel Solver. E. Determine the estimated total allocated cost per unit of the basic skateboard and the exclusive skateboard under the reciprocal method. # Explain the differences in the results from the different allocation methods. When would managers use each method