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c) Use the reciprocal method to allocate the budgeted costs of the Materials Procurement Department and General Factory Support Department to the Machining Department and
c) Use the reciprocal method to allocate the budgeted costs of the Materials Procurement Department and General Factory Support Department to the Machining Department and Assembly Department. (12 marks)
d) Compare the costs allocated to the two operating departments based on the three methods in 2a-c and discuss which method may be the most appropriate one for the company? (6 Marks)
Electro Ltd manufactures semi-conductors for the computer industry. The firm has two operating departments: the machining department and the assembly department. The firm also has two support departments: materials procurement and general factory support. The usage of these two support departments' output for 2019 was as follows: Operating departments Machining Assembly Department Department Support departments General Materials Factory User of Services Procurement Support Budgeted manufacturing overhead costs before an inter-department cost allocations 900,000 750,000 Support work supplied by: Materials Procurement 0% 25% General Factory Support 15% 0% 1,000,000 4,000,000 45% 50% 30% 35% REQUIRED: a) Use the direct method to allocate the budgeted costs of the Materials Procurement Department and General Factory Support Department to the Machine Centre and Assembly Centre. (4 Marks) AND b) Use the step down method to allocate budgeted costs of the Materials Procurement Department and General Factory Support Department to the Machine Centre and Assembly Centre. (8 Marks)Step by Step Solution
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