ABC company is a producer of Office furniture. In this company there are two support departments, Store and Maintenance, and two Operating departments, Cutting and Welding . For the first quarter of 2012, ABC incurs the following costs in its departments:

	Support departments		Operating departments		Total
	Store	Maintenance	Cutting	Welding
Budgeted overhead costs before any inter-department cost allocation	300,000	58,000	200,000	100,000	658,000
Support work supplied by :
Store		20%	60%	20%
Maintenance	10%		40%	50%

Required:

• Allocate the two support department costs to the two operating departments using the following methods

A) Step-down method, Store first (4 points)

B) The reciprocal method (5 points)