Hi I have an accounting assignment due in a few hours. I have attached the the assignment but please only provide answer for QUESTION 3 (ABC BANK question).

Class 4: Cost allocation, job costing and ABC 1. Kingsway Ltd. You have been asked to suggest a method of deducing the full cost of various production orders of Kingsway Ltd. This method will be used as a basis for setting prices. The production orders vary greatly in size and nature from one to the next. The following information has been taken from the budget for the forthcoming financial year: Direct labour hours: Machine hours 100,000 hours 90,000 hours Manufacturing costs: Power Direct materials Machine maintenance and repairs Factory heat and light Lubricants and cleaning materials Direct labour Depreciation: factory buildings machinery Indirect labour 40,000 200,000 38,000 4,000 6,000 600,000 130,000 402,000 100,000 1,520,000 The business is not departmentalised for accounting purposes. All direct labour is paid the same hourly rate. Required: 1. Explain the difference between direct and indirect costs. Give an example of each. Can a given cost item be both a direct cost and an indirect cost? Why do managers distinguish between direct costs and indirect costs? 2. Calculate two feasible overhead rates for the year. 3. Prepare full costings for Order No 101 using each of the rates calculated in (2) (that is, two separate costings). The cost sheet for Order No 101 shows the following: Raw materials 5,000 Direct labour hours 4,000 hours Machine hours 1,900 hours. 4. State briefly which of the two bases of overheads you prefer and why. How might you improve on the two possible costs that you derived in (3) by taking a slightly different approach? 13 2. Edgware Insight Edgware Insight provides outsourcing services and advice to both government and corporate clients. For costing purposes, Edgware Insight classifies its departments into two support departments (Administrative/ Human Resources and Information Systems) and two operating departments (Government Consulting and Corporate Consulting). For the first quarter of this year, Edgware Insight incurs the following costs in its four departments: Administrative/Human Resources (A/HR) 50,000 Information Systems (IS) 280,000 Government Consulting (GOVT) 875,600 Corporate Consulting (CORP) 1,245,200 The actual level of support relationships among the four departments for the first quarter of this year was: USED BY SUPPLIED BY A/HR IS A/HR IS GOVT CORP - 35% 40% 25% 20% - 20% 60% The Administrative/Human Resource support percentages are based on headcount. The Information Systems support percentages are based on actual hours of computer time used. Required: 1. Allocate the two support department costs to the two operating departments using the following methods: (a) Direct method (b) Step-down method (allocate Administrative/Human Resources first) (c) Step-down method (allocate Information Systems first). Compare and explain the differences in the support department costs allocated to each operating department. 2. What criteria could determine the sequence for allocating support departments using the stepdown method? What criterion should Edgware Insight use if government consulting jobs require the step-down method for tendering purposes? 3. Why do conventional product costing systems allocate support department costs first to the operating departments before assigning them to individual jobs? Clearly show your workings. 14 3. ABC Bank (collected for marking) ABC Bank is a multinational bank with headquarters in London. It has three major divisions: investment, retail, and commercial banking. During the financial crisis and the subsequent economic downturn the bank has come increasingly under pressure to reduce cost and to determine competitive prices. To meet that objective, ABC bank is developing an activity-based cost system for its cashier department which is part of the retail banking division. A task force has identified five different activities: (1) the processing of deposits, (2) the processing of withdrawals, (3) answering customer inquiries, (4) selling negotiable instruments, and (5) the balancing of cash registers. By tracing the costs of operating the cashier department to these five activities, the task force has compiled the following information regarding support costs and activities for one of its branches: Support Activity Processing deposits Processing withdrawals Answering inquiries Selling negotiable instruments Balancing cash registers Estimated Cost 44,445 39,120 37,290 7,290 6,435 134,580 Quantity 49,875 34,125 67,500 1,650 1,950 The task force has developed the following list of activities which are undertaken in connection with the \"Retirement Plus Account\