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A Business has two support departments (l.T. Service and Admin) and two production departments (Fabrication and Assembly). I.T costs are allocated based on I.T. support
A Business has two support departments (l.T. Service and Admin) and two production departments (Fabrication and Assembly). I.T costs are allocated based on I.T. support hours. Admin costs relate to number of employees. Their $10 million operating cost budget is shown in the table below. REQUIRED: a) Allocate support costs using Direct and Reciprocal methods. (use the excel worksheet or the answer booklet if you prefer). (6+ 9 Marks) b) Provide a discussion about the benefits /pitfalls of using these two methods plus one other method. Which do you recommend? Why? (There is a space on the spreadsheet) (5 marks) IT SERV CEI ADMIN FABRICATON ASSEMBLY! Total 4000 200 S2$600 1200 20 $2,600 $10,000 $6,280 2100 120 TOTAL COSTS ($000) $520 LT. Support Hours # EMPLOYEES 700 40 20
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