athletes. The company has two product lines (clothing and shoes), which are produced in separate manufacturing cal methods. Sportz, Inc., manufactures athletic shoes and athletic clothing for both amateur and professional 16-34 Support-department cost allocations; single-department cost pools; direct, step-down, and recipro- facilities; however, both manufacturing facilities share the same support services for information technology Suport and human resources. The following shows total costs for each manufacturing facility and for each support department. Information technology (IT) Human resources (HR) Support Variable Costs $ 600 Fixed Costs $ 2,000 $ 400 $ 1,000 Clothing $2,500 $ 8,000 Shoes $3,000 $ 4,500 Total costs $6,500 $15,500 Total Costs by Department (in thousands) $ 2,600 $ 1,400 $10,500 $ 7,500 $22,000 The total costs of the support departments (IT and HR) are allocated to the production departments (clothing and shoes) using a single rate based on the following: Information technology: Human resources: Data on the bases, by department, are given as follows: Department Clothing Shoes Information technology Human resources Number of IT labor-hours worked by department Number of employees supported by department IT Hours Used Number of Employees 5,040 220 3,960 88 92 3,000 12000 400 1. What are the total costs of the production departments (clothing and shoes) after the support depart- ment costs of information technology and human resources have been allocated using (a) the direct method, (b) the step-down method (allocate information technology first), (c) the step-down method (allocate human resources first), and (d) the reciprocal method? 2. Assume that all of the work of the IT department could be outsourced to an independent company for $97.50 per hour. If Sportz no longer operated its own IT department, 30% of the fixed costs of the IT department could be eliminated. Should Sportz outsource its IT services?