ABC Manufacturing absorbs overhead in products through departmentalization technique. It has three production departments (cutting, molding and finishing) and two service departments (human resources and information systems). To compute departmental rate, ABC uses labor hours as allocation base. However, for reapportionment purpose, ABC uses number of staffs and system usage time as allocation bases for human resources (HR) and information systems (IS) departments respectively. Related information is given below:

Detail Production Departments Service Departments Cutting Molding Finishing HR IS Budgeted Overhead Cost 800,000 700,000 500,000 200,000 300,000 Labor Hours 8,000 6,000 4,000 Number of staffs 400 300 200 - 100 System usage time (in hour) 8,000 5,000 3,000 4,000 - Product A labor usage 20 15 - - -

Required (6 Marks)

a) Allocate service department costs to production departments assuming that ABC applies step down method in re-apportionment.

b) Allocate service department costs to production departments assuming that ABC applies simultaneous equation method in re-apportionment. c) Assume that ABC applies simultaneous equation method to charge overhead costs into product. Compute the total manufacturing cost of Product A if the direct material and direct labor cost for producing 1 unit of Product A is Tk. 50 and Tk. 30 respectively