Final answer:
The student's question involves allocating support department costs to operating departments using the direct method and step-down method in cost accounting, which is important for accurate cost assignment and managerial decision-making in a manufacturing setting.
Step-by-step explanation:
The student's question is about allocating costs of support departments to operating departments using different cost allocation methods. These methods include the direct method and two variations of the step-down method. The direct method allocates support department costs directly to operating departments based solely on a chosen allocation base. The step-down method allocates costs sequentially, with one support department's costs being allocated first (in this case, Materials Requisitions) followed by the remaining support departments, considering inter-departmental services.
These allocation methods are used to accurately assign overhead costs to the products being manufactured, which is crucial for setting prices and for managerial decision making. When the cost of machines increases, companies may choose a production technology that is less capital-intensive and more labor-intensive, as capital costs become relatively more expensive. This aligns with economic shifts observed in the United States during the 1970s. Additionally, the provided information about market demand suggests that industry consolidation may occur, affecting the number of firms in the long run.