Management Accounting I

C. Tun Teja Sdn Bhd (TTSB) is an organization that offers a variety of plastic bottles for home use. TTSB has FOUR (4) departments comprising TWO (2) service departments and TWO (2) production departments. ONE (1) service department utilizes machine hours for cost allocation, while another service department allocates its cost using number of employees. Costs information for the current year are based on the following data: Moulding Assembly Maintenance Cafeteria Overhead cost RM33,250 RM42,750 RM52,000 RM90,000 Machine hours 7,500 5,000 9.500 3,000 Number of employees 15 25 10 9 Nurul Ain, the newly employed staff of TTSB, is given a responsibility to make the allocation using the step-down method. Nurul Ain has allocated service department that incur the lowest costs first to other departments. REQUIRED: (a) Comment on the Nurul Ain practice in allocating service departments costs above. (2 Marks) (b) Allocate the service department costs to the production departments by using step- down method. (6 Marks) (c) List TWO (2) differences between direct method and reciprocal method. (2 Marks)