Qbikes two divisions also share some supporting departments services including Information Systems (IS), Finance, Accounting & Human Resources (FAH), and General Administration (GA).

The company is deciding whether to use the direct and step-down methods. The allocation bases have been confirmed. Number of user ID, number of employees and floor area occupied are for allocating IS expenses, FAH expenses and GA expenses, respectively. Table 2 presents the estimated information for one month.

Q4. Compute the total allocated costs for the two-production divisions by using the direct method. (5 marks)

Q5. Compute the total allocated costs for the two-production divisions by using the step-down method (Allocate in order of IS, FAH and GA). (5 marks)

Q6. Based on your calculated figures in Q4 and Q5, which method would you recommend the company to use? Briefly explain your reasons. (10 marks)

Table 2: Support Departments' Estimated Information \begin{tabular}{|l|c|c|c|c|c|c|} \hline Budget & IS & FAH & GA & Foldable Bikes & Electric Bikes & Total \\ \hline Supporting department costs & $240,000 & $120,000 & $220,000 & 0 & 0 & $580,000 \\ \hline Number of user ID & 10 & 15 & 17 & 50 & 40 & 132 \\ \hline Number of employees & 8 & 14 & 16 & 80 & 64 & 182 \\ \hline Floor area occupied (square meter) & 150 & 300 & 500 & 1,600 & 2,400 & 4,950 \\ \hline \end{tabular} Table 2: Support Departments' Estimated Information \begin{tabular}{|l|c|c|c|c|c|c|} \hline Budget & IS & FAH & GA & Foldable Bikes & Electric Bikes & Total \\ \hline Supporting department costs & $240,000 & $120,000 & $220,000 & 0 & 0 & $580,000 \\ \hline Number of user ID & 10 & 15 & 17 & 50 & 40 & 132 \\ \hline Number of employees & 8 & 14 & 16 & 80 & 64 & 182 \\ \hline Floor area occupied (square meter) & 150 & 300 & 500 & 1,600 & 2,400 & 4,950 \\ \hline \end{tabular}