Required: a) Prepare cost allocations of the janitorial and maintenance departments to the production departments (Letters, Express delivery parcels and Regular delivery parcels) of a delivery company using: i. the direct method ii. the step method (begin with the janitorial costs) Show total costs under each of the product department after the allocation. b) Discuss which method provides the more reasonable allocation of service department costs to the production departments for this delivery service company and explain why it is the better method.

Allocation of service department costs 11% Express- delivery Maintenance Janitorial Letters parcels Regular- delivery parcels Total $1,310,400 $2,620,800 Service department costs Maintenance - machine hours Janitorial - square metres 50 2,800 225 400 3,475 500 1,200 1,650 1,750 5,100