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Allocate costs of maintenance and it support departments

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Reference no: EM132725647

A Ltd has two service departments, maintenance and IT support, that assist two production departments, assembly and machining. Budgeted costs of maintenance and IT support are $800,000 and $1,800,000 respectively. Usage of the service departments' output during the year is anticipated to be:

Services provided to: Maintenance IT support Maintenance Assembly

Maintenance - 20 % 20% 60%

IT support 10 - 60% 30%

Required:

a) Use the direct method to allocate the costs of maintenance and IT support departments to assembly and machining departments. Please show all calculations/workings.

b) Use the step-down method to allocate the costs of maintenance and IT support departments to assembly and machining departments. Please show all calculations/workings.

Reference no: EM132725647

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