a) Use the direct method to allocate the budgeted costs of the Engineering Department, Computing Department and Human Resource Department to the Mineral Analysis Department and the Hydrological Analysis Department.

b) Use the step-down method to allocate the budgeted costs of the Engineering Department, Computing Department, and Human Resource Department to the Mineral Analysis Department and Hydrological Analysis Department.

c) Use the Reciprocal Method to allocate the budgeted Costs of the Engineering and Computing departments to the Mineral Analysis Department and the Hydrological Analysis Department.

d) Which support department cost allocation method is best?

e) Discuss whether firms should use budgeted usage or actual usage for allocating indirect costs.

QUESTION 7 Ruby Laboratories tests soil samples for mining companies and various government departments. The firm has two production departments: the Mineral Analysis Department and the Hydrological Analysis Department. The firm also has three support departments: the Engineering Department, the Computing Services Department and the Human Resources Department. The usage of these three support departments' output for 2016 was as follows: User of Services Support departments Production departments Human Mineral Hydrological Engineering Computing Resources Analysis Analysis 0% 0% 50% 50% 15% 0% 10% 35% 40% Provider of Services Engineering Computing Human Resources 0% 10% 5% 0% 45% 40% Page 3 of 6 BMAN21040 REPRINT The budgeted department costs in 2016 were as follows: Support Departments: Engineering 400,000 Computing 350,000 Human Resources 150,000 900,000 Production Departments: Mineral Analysis Hydrological Analysis 510,000 67,000 577,000 1,477,000 Total Overhead Costs