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Question 1 (15 marks) University Publishing Limited has two operating departmentsBook sales and Video sales and two service departmentsHRO and IT. The company uses the
Question 1 (15 marks) University Publishing Limited has two operating departmentsBook sales and Video sales and two service departmentsHRO and IT. The company uses the number of employees to allocate HRO costs and the IT department uses processing time to allocate IT costs. The following data are provided: Budgeted costs incurred before any cost allocations Book sales 751.200 Video sales 382,100 HRO 55,600 IT 184,700 Budgeted number of employees Book sales 36 Video sales 18 IT 15 Budgeted processing time (in minutes) Book sales 1,750 Video sales 1,450 HRO 280 Required: a. Allocate the service departments' costs to the operating departments using the direct method. (4 marks) b. Rank the support departments based on the percentage of their services provided to other support departments. Use this ranking to allocate the support departments' costs to the operating departments based on the step-down method. (7 marks) c. Briefly discuss reasons why service department costs are allocated. (4 marks)
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