3.

Quick Transportation operates local taxi service and bus transportation across a region.To provide superior service Quickoperates its own service station. Maintaining schedules, bookings, and other administrative functions are provided by administrative services.Costs incurred over the last six months:

Required:

a.Allocate costs of administrative and service station using:

1.The direct method of allocation.

2.The step-down method. Assume administrative is allocated first.

3.The reciprocal method of allocation.

Administrative Service Station Local taxis Regional transportation

Costs $150,000 $725,000 $350,000 $ 600,000

Number of km travelled 15,000 150,000 235,000

Administrative time 15% 45% 40%