Verizon Communications Inc. provides telecommunications services using operating costing. In April 2036, the company incurs $50,000,000 in direct costs and $30,000,000 in indirect costs related to network maintenance.

Required:

• 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.