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Shannon Office Supplies (SOS) Ltd. is an online supplier of office products. The managers of the operating divisions are assessed on their ability to control
Shannon Office Supplies (SOS) Ltd. is an online supplier of office products. The managers of the operating divisions are assessed on their ability to control all overhead costs incurred and allocated to their division. Two service departments, Administration and Technology Services, provide support for SOS's operating divisions. Budgeted data for the coming quarter are provided below: Service departments Operating divisions Technology Corporate Consumer Admin. Services Sales Sales Overhead costs $ 375,000 $ 275,000 $390,000 $ 420,000 Employees 10 40 50 30 Support hours provided 800 400 3,600 2,800 Administration costs are allocated based on the number of employees in the department and Technology Services costs are allocated based on support hours provided. Required: a. Allocate overhead from the two service departments using the direct method and determine the total overhead for each operating division. b. Allocate overhead from the two service departments using the step method and determine the total overhead for each operating division. You should allocate the Administration Department first. c. Allocate overhead from the two service departments using the reciprocal method and determine the total overhead for each operating division
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