Required information [The following information applies to the questions displayed below.] Northwest Aircraft Industries (NAI) was founded 45 years ago by Jay Preston as a small machine shop producing machined parts for the aircraft industry, which is prominent in the Seattle/Tacoma area of Washington. By the end of its first decade, NAI's annual sales had reached $15 million, almost exclusively under government contracts. The next 30 years brought slow but steady growth as cost-reimbursement government contracts continued to be the main source of revenue. Realizing that NAI could not depend on government contracts for long-term growth and stability, Drew Preston, son of the founder and now president of the company, began planning for diversified commercial growth. As a result of these efforts, three years ago NAI had succeeded in reducing the ratio of government contract sales to 50 percent of total sales Traditionally, the costs of the Material-Handling Department have been allocated to direct material as a percentage of direct-material dollar value. This was adequate when the majority of the manufacturing was homogeneous and related to government contracts. Recently, however, government auditors have rejected some proposals, stating that "the amount of Material-Handling Department costs allocated to these proposals is disproportionate to the total effort involved." Kara Lindley, the newly hired cost-accounting manager, was asked by the manager of the Government Contracts Unit, Paul Anderson, to find a more equitable method of allocating Material-Handling Department costs to the user departments. Her review has revealed the following information. The majority of the direct-material purchases for government contracts are high-dollar, low-volume purchases, while commercial materials represent low-dollar, high-volume purchases .Administrative departments such as marketing, finance and administration, human resources, and maintenance also use the services of the Material-Handling Department on a limited basis but have never been charged in the past for material-handling costs