James Inc. is a computer software consulting company. Its three major functional areas are computer programming, information systems consulting, and software training. Kathy Coward, a pricing analyst in the Accounting Department, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Coward is considering three different methods of allocating overhead costs-the direct method, the step method, and the reciprocal method. Coward assembled the following data on overhead from its two service departments, the Information Systems Department and the Facilities Department.information systems is allocated on the basis of hours of computer usage; facilities are allocated on the basis of floor space.
Required: Allocate the service department costs to the user departments using the step method. Allocate Information Systems first and round to the nearest dollar. Provide total user department costs.