Case study 1 Belgrave Ltd is a small manufacturing entity based in eastern end of Melbourne. The company has two operating departments and five support departments (as noted in the table below). Belgrave Ltd prepares monthly overhead budgets for its departments based on budgeted volume levels for each month. The budgeted costs of the departments for the month of February 2022 are as follows: Departments Amount ($) Operating departments Production 34,700 Finishing 48,900 Support departments Cleaning 12,500 Human resources 10,000 General plant 26,090 administration Cafeteria 1,640 Warehouse 2,670 The Production department requires 5,000 machine hours per month and the Finishing department requires 15,000 machine hours per month. Warehouse requisitions for the month of February 2022 as estimated to be as follows: Production department: 2,000 requisitions; Finishing department: 1,000 requisitions Department Number of Square meters Labour hours employees of floor space Cleaning 5 100 750 Human resources 2 200 250 General plant administration 35 700 0 Cafeteria (operating loss) 10 400 1,000 Warehouse 5 700 1,000 Production 50 3,000 8,000 Finishing 93 4,900 16,000 Case study 1 continued on next page Required: (1) Allocate support department costs to operating departments using direct method. Use the allocation base for each support department you think is most appropriate. Develop overhead rates per machine hour for the operating departments using total cost of the operating departments (after including support department costs). (2) Allocate support department costs to operating departments using step down method. Allocate the support department costs in the same sequence of the support departments given in the case study. Use the allocation base for each support department you think is most appropriate. Develop overhead rates per machine hour for the operating departments using total cost of the operating departments (after including support department costs). (3) Belgrave Ltd evaluates the performance of the operating department managers based on how well they managed their total cost (including allocated costs). As the manager of Production department, which allocation method would you prefer from the results obtained in requirements (1) and (2) above? Explain your answers. (5 + 7.5 +1.5 = 14 Marks)