The Suburbia Manufacturing Co. has two main products X andY, each of which is produced in a separate department. In order to manufacture the products X and Y, the company has three major service departments, A. B and C.

An analysis of the work done by Departments A, B and C in a typical period is as follows:

USER DEPT Total units Dept A 8 c X y of work done A 0 30 0 50 20 100 B 0 0 50 10 40 100 c 40 0 0 40 20 100 The costs of the service departments during a typical period are:

A 8 c

$ $ $

Variable labour & material cost 14802 2000 4000 Supervision 2000 2000 7000 Depreciation 4000 4000 5000 20800 8000 16000 REQUIRED 1. Determine the allocation of the total costs of depts A. B and C to the products X and Y, using the reciprocal method of allocation 2. Given that dept A is a power plant generating 500000 units, and that the company has the opportunity to obtain power from a third party supplier at a cost of $0.03 per unit, determine which source of supply is to be preferred