The production departments at Peabody Manufacturing Company are Fabrication and Finishing. The two service departments are Maintenance and General Factory Administration. Management has decided to allocate maintenance costs on the basis of the area (in square feet) in each department, and general factory administration costs on the basis of the number of direct labor hours in each department. Cost and other data for the production and service departments of Peabody Manufacturing Company are as follows: Maintenance 8,000 Fabrication 20,000 Administration Area Occupied (sq. ft.) 4,000 Direct Labor Hours 20,000 Total costs $500,000 Finishing 16,000 100,000 40,000 $650,000 60,000 $1,250,000 $1,750,000 Required: a) Using the direct method, determine the amount of service department costs allocated to each of the two production departments. (2 points) b) Using the step-down method, determine the amount of service department costs allocated to each of the two production departments. Allocate the costs of the Maintenance department first, then the General Factory Administration department. (2 points) c) Write the equations that you would use to determine the cost of each service department under the reciprocal (matrix) method. Use the llowing definitions in constructing your equations: Let A = Total cost of the Administration Department; and M Total cost of the Maintenance Department. (2 points) = Area Occupied (sq.ft.) Direct Labor Hours Total costs Administration 4,000 20,000 $500,000 Maintenance 8,000 40,000 $650,000 Fabrication 20,000 60,000 $1,250,000 Finishing 16,000 100,000 $1,750,000 Costs Allocated to Fabrication Finishing a) Costs to Allocate Cost Rate Total Direct method Administration Maintenance Total Total service costs allocated to prodn depts b) Step Down Method Costs Allocated to Administration Fabrication Costs to Allocate Cost Rate Finishing Total Maintenance Administration Total Total service costs allocated to prodn depts Equations for the reciprocal method c) Eqn1 Eqn2 Proportion of Maintenance used by Administration Proportion of Administration used by Maintenance