Support activity cost allocation Jake's Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production activities are supported by the Maintenance and Security activities. Security costs are allocated to the production activities based on asset value. Maintenance costs are normally allocated based on machine hours. However, Maintenance costs typically correlate more with the number of service calls. Information regarding the activities is provided in the following table: Number of service calls Machine hours Asset value Department cost Maintenance 17 89 Security 20 Mining Cutting 60 88 182 20 176 $80,000 $42,500 $120,000 $160,000 $480,000 $95,000 $200,000 $25,000 1. Is the process of allocating maintenance costs based on machine hours correct? Identify the measure than can possibly be used to allocate the maintenance costs. No Measures that can possibly be used to allocate the maintenance costs. a. Number of service calls b. Asset value c. Department cost d. None of the above a 2. Based on your response to part (1), determine the total costs allocated from each support activity to the other activities using the reciprocal services method and the most appropriate cost driver for Maintenance. Security Mining Department Department Maintenance cost allocation Maintenance Department Security cost allocation 12,500 7,500 $ 22,500 7,500 $ Production activities total costs 40,000 X $ Cutting Department 7,500 40,000 X 40,000 X