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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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