27Norman Manufacturing prices its products at full cost plus 40%. The company operates two support departments and two producing departments. Budgeted costs and normal activity levels are as follows:

	Support Departments		Producing Departments
	W	X	Y	Z
Overhead costs	$10,000	$25,000	$45,000	$60,000
Square metres	800	2,000	2,000	6,000
Number of employees	10	15	30	20
Machine hours	-	-	5,000	3,200

Support Department Ws costs are allocated based on square metres and Support Department Xs costs are allocated based on number of employees.

Predetermined overhead rates for the producing departments are based on machine hours.

Required:

(a) Allocate the support-department costs to the producing departments using the step-down method. (11 marks)

(b) Calculate the predetermined overhead rate for each of the producing departments. (4 marks)

(c) What are the two equations for allocating the support department costs using the reciprocal method? (You do NOT need to solve the equations and allocate the costs using the reciprocal method.) (5 marks)