Reference no: EM133920591

Problem

D Inc. uses two operating departments to produce a laundry detergent, Mixing and Packaging. In addition, the company has two supporting departments, Procurement and Information Technology. The Procurement department handles material requisitions and purchase orders of all departments, whereas the Information Technology department is responsible for maintaining the information system of the entire company. The Procurement department costs are allocated based on the number of purchase orders used. Information Technology department costs are allocated based on computer time in hours. The supporting departments' costs are allocated to the operating departments using a single rate. The data below summarizes the support orders and hours utilized by each department as well as their budgeted variable and fixed costs: Mixing Packaging Procurement Information Technology Department variable costs $84,000 $32,625 $615,000 $270,000 Department fixed costs $345,750 $235,500 $2,340,000 $645,000 Purchase orders used 1,200 2,350 - 430 Computer time (in hours) 375 540 165 - Required: Based on the data provided, calculate the total costs of the operating departments, after the allocated supporting departments' costs, using: Direct method. Get the instant assignment help. Step-down method with Information Technology department first. Provide one strategy for deciding which supporting department to be allocated first.