QUESTION ONE LabAid Ltd provides radiological services. Despite the variety of patients seen at LabAid, the radiological services involve only two operating departments (Daily Patient and Radiology) and two service departments (Administrative Services and Maintenance Services). For the first quarter of 2022, LabAid incurs the following costs in its four departments: Department Daily Patient Radiology Administrative Services Maintenance Services Overhead costs 350,000 300,000 50,000 55,000 The actual level of support relationships among the four departments for the first quarter of 2022 was: Used by Administrative Maintenance Daily Services Services Patient Radiology Supplied Administrative 25% 40% 35% Services by Maintenance Services 10% 30% 60% The Administrative Services support percentages are based on number of employees. The Maintenance Services support percentages are based on total labour hours. Required: a) Allocate the service department costs to the two operating departments using the direct method. (10 marks) b) Allocate the service department costs to the two operating departments using (i) the step-down method (Allocate Administrative Services first) (ii) the step-down method (Allocate Maintenance Services first) (30 marks) c) Assume that you are the manager of the Daily Patient department. Discuss which method of cost allocation would you prefer. Justify your decision. (5 marks) d) Mr. Smith, the financial controller of LabAid, is convinced that the step-down method allocates more costs to the operating departments than does the direct method. Do you agree with Mr. Smith? Explain. (10 marks) e) Discuss two different criteria Mr. Smith can use to determine the sequence for allocating support department costs using the step-down method