The following information is related to a manufacturing firm with two distinct main products. Information Technology and HR are the only support departments. The following cost and resource utilization data is given

	VARIABLE COST	FIXED COST	IT HOURS USED	No OF EMPLOYESS
INFORMATION TECHNOLOGY	600	2000		92
HUMAN RESOURCE	400	1000	3000
Main Product 1	2500	8000	5040	220
Main product 2	3000	4500	3960	88

i

1. Determine the production costs for main products using
   1. The direct method
   2. The step down method (IT allocated first)
   3. The step down method (HR allocated first)
   4. The reciprocal method
2. (10 points) Assume that the IT services can be outsources to another company for $97.50 per hour while eliminating 30% of the fixed costs. Should we outsource the IT services?