Verizon Communications Inc. provides telecommunications services. In January 2037, the company incurs $80,000,000 in direct costs and $50,000,000 in indirect costs related to network maintenance.

Requirements:

• Classify each cost as direct or indirect.
• Calculate the total operating costs.
• Allocate indirect costs using the step-down allocation method.
• Prepare a cost allocation schedule showing the distribution of indirect costs.
• Analyze the impact of indirect costs on service pricing.