Royal Paint's manager has queried you on the budget but in particular about the service costs and how they are allocated.The production department has been categorised into Manufacturing and Packaging.These are supported by Maintenance and IT departments.Royal Paint allocates maintenance costs based on the number of repair jobs and services whereas IT costs are allocated based on the number of jobs logged online or manually.

You are provided with the following information:

Manufacturing

$625,000

Packaging

$285,000

Maintenance

$30,000

IT

$75,000

Department

No. of Maintenance (repairs and services)

No. of IT (online and manual jobs logged)

Manufacturing

26

68

Packaging

54

45

Maintenance

17

15

IT

25

10

Required:

1. Using the Direct Method allocate the service centre costs. (2 marks)
2. Using the Step Method allocate the service centre costs. (4marks)
3. Using the Reciprocal Method allocate service centre costs.6 marks)
4. Discuss the implications of your results and why such an analysis is important.