The Hunt Corporation has three service departments which are allocated based on the following: Administration $($Direct labour$-$hours$),$ Maintenance $($Square feet$),$ and Cafeteria $($Number of Employees$)$ and two operating departments: Cutting and Painting.

Operating

Service

Cutting

Painting

Administration

Maintenance

Cafeteria

Direct labour costs

$$3,200,000$

$$2,400,000$

$$480,000$

$$180,000$

$$124,000$

Direct material costs

$$3,820,000$

$$1,425,000$

$0$

$54,000$

$350,000$

Overhead costs

$$1,852,000$

$$1,690,000$

$100,000$

$78,000$

$80,000$

Direct labour$-$hours

$720,000$

$61,000$

$50,000$

$34,000$

$46,000$

Number of employees

$100$

$120$

$6$

$4$

$3$

Square footage

$10,000$

$15,000$

$2,000$

$800$

$500$

Required

Allocate the costs using the direct method. $($You do not need to show calculations but must show the amount of each allocation$)$

Allocate the costs using the step$-$down method based on the following order: cafeteria, administration, maintenance. $($You do not need to show calculations but must show the amount of each allocation$)$

The Cutting department is a profit centre. The manager of the Cutting department is unhappy since he feels that being evaluated based on ROI is unfair. Explain with support whether the Cutting department manager is justifiably upset by the evaluation method utilized. If the evaluation is not appropriate, then explain how the Cutting department manager should be evaluated.