Problem $1$

Carica Company is a manufacturer with two production departments $($Machining and

Assembly$)$ as well as two support departments $($Materials Requisitions and Utility Services$).$

For the last quarter of $2020,$ Carica's cost records indicate the following:

SUPPORT

PRODUCTION

Required:

Allocate the two support departments' costs to the two operating departments using the

following methods:

a$.$ Direct method $(5$ Marks$)$

b$.$ Step$-$down method $($allocate MR first$)(5$ Marks$)$

c$.$ Step$-$down method $($allocate US first$)(5$ Marks$)$

d$.$ The Algebraic method. $(10$ Marks$)$

Compare and explain differences in the support$-$department costs allocated to each

production department. $(20$ Marks$)$

What approaches might be used to decide the sequence in which to allocate support

departments when using the step$-$down method? $(15$ Marks$)$