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 Amount (5) Lease rental 35,000 Industrial power and fuel 420,000 Wages to supervisor of production departments 6,400 Electricity 5,600 Depreciation on machinery 16,100 Depreciation on building 18,000 Payroll expenses 21,000 Canteen expenses 28,000 Superannuation contribution 58,000 Further information regarding the above indirect expenses are as follows: Particulars M N 0 P Q Floor space 1.200 1,000 1,600 400 800 (square meters) Electricity connection points 42 52 32 18 18 Cost of machines (S) 1.200.000 1.000.000 1.400.000 400,000 600,000 Number of employees 48 52 45 15 25 Direct wages ($) 172.800 166,400 153.000 36,000 53,000 Horse power of machines 150 180 120 Working hours 1.240 1,600 1.200 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 M 30% 40% N 35% 25% O 25% 20 P - 15% Q 10%