Allocation and Responsibility Accounting Assume that Timberland Company uses a responsibility accounting system for evaluating its managers, and that abbreviated performance reports for the company's three divisions for the month of March are as follows. (in thousands) Total East Central West Operating income before service department cost allocations $384,000 $160,000 $136,000 $88,000 Less allocated costs: Information Technology (200,000) (76,923) (61,538) (61,538) Personnel (128,000) (56,889) (42,666) (28,445) Division income $56,000 $26,188 $31,796 $(1,983) The West Division manager is very disturbed over his performance report and recent rumors that his division may be closed because of its failure to report a profit in recent periods. He believes that the reported profit figures do not fairly present operating results because his division is being unfairly burdened with service department costs. He is particularly concerned over the amount of Information Technology costs charged to his division. He believes that it is inequitable for his division to be charged with one-third of the total cost when it is using only 20% of the services. He believes that the Personnel Department's use of the Information Technology Department should also be considered in the cost allocations. Cost allocations were based on the following distributions of service provided: Services Provider Information Technology Personnel Services Receiver Computer Personnel Services East Central West 35% 25% 20% 20% 10% 40% 30% 20% Required a. What method is the company using to allocate Personnel and Information Technology costs? b. Recompute the cost allocations using the step method. Note: Round your answers below to the nearest whole dollar. Producing Divisions Central West East $ $ Service Departments (in thousands) Computer Personnel Service department costs $ Cost allocations: Information Technology: (1) To Personnel: (2) To East: (3) To Central: (4) To West: Personnel: (5) To East: (6) To Central: (7) To West: Total cost allocations $ $ $ $ $ $ $ c. Revise the performance reports to reflect the cost allocations computed in requirement (b). Total East Central West $ $ $ (in thousands) Income before allocations $ Less allocated costs Division income $ $ $ $ $ $ $ $ d. Comment on the complaint of the West Division's manager. The complaint made by the manager of the West Division was