Transcribed image text: Question 3 (25 marks) (a) Winky Ltd has three separate production departments - cutting, sewing, and packaging and two service departments - canteen and maintenance. The canteen department and maintenance department provide services to the three production departments. The following tables show the planned operating costs and expected levels of activity for the year 2020: Service Departments Canteen Maintenance *000 '000 Production Departments Cutting Sewing Packaging "000 "000 000 Departmental activity measures: Direct labour hours 100 2,000 1,000 Machine hours 870 130 200 800 125 Departmental overheads ($): Variable overheads Fixed overheads 7,000 17,155 12,000 7,845 21,500 7,900 12,600 10,000 4,000 2,000 Use of service departments: Canteen - estimated usage in direct labour hours Maintenance-estimated usage in machine hours 400 200 120 80 60 30 30 5 Required: (i) Allocate the service departments' costs to the production departments using the step-down method, by which the service department with the largest overhead amount gets the apportionments first. (6 marks) Discuss any three factors to be considered when choosing the cost allocation approach for allocating service department charges to production departments within an entity