Scenery Props has two production departments (Interior and Exterior) and allocates overhead to these production departments based on machine hours.These two production departments are supported by two service departments Repairs and Maintenance (R&M) and Canteen (CAN).

The interior department operates on two shifts per day equating to 3,500 hours per year.The exterior department also operates on two shifts, accumulating 2,500 hours per year.The Interior and Exterior departments utilise services from the support department as tabled below:

Provider of Service Cost Driver Repairs and Maintenance (R&M) Canteen Interior Exterior Total

R&M No. of breakdowns 0 50 60 25 135

Canteen No. of staff 7 0 12 18 37

Overhead costs incurred for the year in the Interior department were $650,000 and in the Exterior was $470,000.The Repairs and Maintenance experienced exceptionally high costs for the year and accumulated $350,000 in expenses compared to the Canteen who incurred $200,000 in expenses.

Required:

Using an Excel spreadsheet to perform the following analysis:

i)Allocate all overhead to the production departments using the Direct method.(4 marks)

ii)Allocate all overhead to the production departments using the Step method.(4 marks)

iii)Allocate all overhead to the production departments using the Reciprocal method. (6 marks)

iv)Of the three methods which is the most suitable method for Scenery Props?(6 marks)