(a) Identify and discuss the main differences between the direct and the step-down method of service department cost allocation.

(b) Use the direct method to allocate the budgeted costs of the service departments, i.e. Human Resources and Information Technology to the main production departments, i.e. Razors and Blades. You are required to show your workings and round your answer to the nearest .

(c) Use the step-down method to allocate the costs of the service departments to the main production departments. Razox allocates the costs of the Human Resources service department first. You are required to show your workings and round your answer to the nearest .

(d) Comment on the appropriateness of the allocation methods used and the computations in parts (b) and (c).

Razox manufactures razors and razor blades in two main production departments: Razors and Blades. Razox also has two service departments: Human Resources and Information Technology. The usage of the two service departments' output for the year is as follows: Provider of Service User of Service Human Resources Information Technology Human Resources 55% Information Technology 60% Razors 20% 25% Blades 20% 20% The budgeted costs in the two service departments, Human Resources and Information Technology, are as follows for the year: Human Resources 700,000 Information Technology 300,000