Refer to Cornerstone Exercise 5-6 for data. Now assume that the Pineapple Pen Company uses the reciprocal method to allocate support department costs to the producing departments.

Required:
1. Prepare the simultaneous equations to allocate the costs of the cafeteria and the maintenance department. (Carry these calculations out to four significant digits.)
2. Allocate the support service costs to the producing departments.
3. Assume departmental overhead rates are based on direct labour hours. Calculate the overhead rate for the pen division and for the pencil division (round overhead rates to the nearest cent).
4. What is the difference between the sequential method and the reciprocal method of allocating support centre costs? Which is better?

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Operating Divisions Support Departments Cafeteria Pens Maintenance Pencils Overhead costs Number of employees Square metres Direct labour hours S1,050,000 15 $875,000 S1,800,000 $2,225,500 25 100 125,000 135,000 15,000 5,000 100,000 108,000