Rose Richard Company has two products. Product 1 is manufactured entirely in Department X. Product 2 is manufactured in Department Y. To produce these two products the Rose Richard Company has two support departments. Material Handling Department and Power Generating Department. An analysis of the work done by Material Handling and Power Generating Department in a typical period follows: Used By Supplied by Material Handling Power Generating Department X Department Y Material Handling - 150 375 225 Power generating 600 - 120 480 The work done by Material Handling Department is measured by the direct labor hours of material handling time. The work done by Power Generating Department is measured by the kilowatt hours per hour. The budgeted costs of the support department for the coming year are as follows: Material Handling Power Generation Variable indirect labor and indirect material costs $105,000 $12,000 Supervision $15,000 $12,000 Depreciation $30,000 $24,000 Total Costs $150,000 $48,000 The budgeted costs of the operating departments for the coming year are $2,250,000 for Department X and $1,200,000 for Department Y. Required: 1. Rank the support department based on the percentage of their services provided to other support departments. Use this ranking to allocate the support department costs to the operating departments based on the step-down method and calculate the total costs of the production departments (Material Handling and Power Generation) after the allocation. 2. If the company decided to only allocate support costs to the production department, what will be the total costs for both the production department? 3. An outside company has offered to supply all the power needed by the Rose Richard Company and to provide all the services of the present power department. The cost of the service will be $40 per kilowatt hour of power. Should Rose Richard accept? Explain.