we need to

Prepare a schedule allocating the service department costs to the production departments using the direct allocation method.

And

Prepare a schedule allocating the service department costs to the production departments using the sequential allocation method.

And

Explain the differences between service and production departments. Give two examples for each.

1. A company reapportions the costs incurred by two service cost centres (materials handling and inspection), to the three production cost centres (machining, finishing and assembly). The following are the overhead costs which have been allocated and apportioned to the five cost centres: Machining Finishing Assembly Materials handling Inspection Total 400,000 200,000 100,000 100,000 50,000 850,000 Estimates of the benefits received by each cost centre are as follows: Allocation of service departments Machining Finishing Assembly Materials handling 30% 25% 35% Inspection 20% 30% 45% Materials handling Inspection 10% 5%