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Support-department cost allocation Combucha Ltd provides consulting services to Small and Medium Enterprises (SME) and Large Enterprises (LE) clients. Combucha Ltd has two support departments
Support-department cost allocation Combucha Ltd provides consulting services to Small and Medium Enterprises (SME) and Large Enterprises (LE) clients. Combucha Ltd has two support departments Administrative Services (AS) and Information Systems (IS); and two operating departmentsSmall and Medium Enterprises (SME )and Large Enterprises (LE). For the first quarter of 2020, Combucha's cost records indicate the following: SUPPORT OPERATING AS IS SME LE TOTAL $600 000 $2 400 000 $ 8 756 000 $12 452 000 $24 208 000 25% 40% 35% 100% Budgeted OH cost Support work supplied by AS (Head count) Support work supplied by IS (Computer time) 10% 30% 60% 100% Required 1. Allocate the two support departments' costs to the two operating departments using the following methods: direct method (20 marks) b. step-down method (allocate AS first) (20 marks) reciprocal method using linear equations (30 marks) 2. Which method do you prefer? Why (30 marks) a. C
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