Illawarra Consultant (IC) has two support departments: Information Technology (IT) and Administration (Admin). In addition,...
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Accounting
Illawarra Consultant (IC) has two support departments: Information Technology (IT) and Administration (Admin). In addition, IC also has two operation departments that deal with two distinct clients, namely, Individual and Corporate department. For the next quarter, the budget of all departments is available below:
Support Department
Operation Department
IT
Admin
Individual
Corporate
Total
Budgeted costs $
1,500,000
2,500,000
7,500,000
8,000,000
19,500,000
Support work supplied by IT
25%
40%
35%
100%
Support work supplied by Admin
30%
30%
40%
100%
Required(show your calculation):
(a)
Allocate the support departments costs to operation departments using the direct method.
(5 marks)
(b)
Allocate the support departments costs to operation departments using the step-down method. Use the highest rank of services provided to another support department to be allocated first.
(5 marks)
(c)
Allocate the support departments costs to operation departments using the reciprocal method.
(10 marks)
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