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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.
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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