Question 3 Cost Allocation

Q3: Cost Allocation [7.5 Marks] Cellar Door produces and distributes wine across Australia. It has three support departments; Finance, Human Resources (HR) and IT, and two operating departments; wine production and product delivery. The following table outlines how much each department uses the support department's services. Support Departments Operating Departments Support Cost Finance HR IT Wine Product Departments Production Delivery Finance $70 000 0% 20% 40% 30% 10% Human $100 000 15% 0% 20% 45% 20% Resources IT $200 000 20% 30% 30% 20% Required: Allocate the support department costs to the operating departments using the direct cost allocation method and calculate the total overhead costs