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Question 1 Amron Ltd has three production departments: M, N, and O and two service departments P and Q. The following particulars are available for the month of March 2020: Particulars Lease rental Industrial power and fuel Wages to supervisor of production departments Electricity Depreciation on machinery Depreciation on building Payroll expenses Canteen expenses Superannuation contribution Amount ($) 35,000 420,000 6,400 5,600 16,100 18,000 21,000 28,000 58,000 Further information regarding the above indirect expenses are as follows: M N O Q 1,200 1,000 1,600 400 800 Particulars Floor space (square meters) Electricity connection points Cost of machines ($) Number of employees Direct wages ($) Horse power of machines Working hours 42 52 32 1,200,000 1,000,000 1,400,000 48 52 45 172,800 166,400 153,000 150 180 120 1,240 1,600 1,200 18 400,000 15 36,000 18 600,000 25 53,000 1,440 1,440 Working hours multiplied by horsepower of machines provides a basis for allocating industrial power and fuel charges. Direct material amounts to 150% of direct wages. Required: (a) Calculate the total cost of the production and service departments after allocating the above listed indirect expenses to production and service departments using appropriate allocation bases. (12 Marks) (b) Recalculate the total cost of production departments after reallocating the cost of service departments to production departments based on reciprocal method (simultaneous equations method). The percentage of support provided by the service departments to the other departments is as follows: (8 Marks) Particulars Support provided by department P Support provided by department Q M 30% 40% N 35% 25% o 25% 20 P - 15% Q 10% (12 + 8 = 20 Marks)