Lauridsen Design Inc. (LDI) is an architectural and design firm located in Calgary, Alberta. LDI has...

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Lauridsen Design Inc. (LDI) is an architectural and design firm located in Calgary, Alberta. LDI has an information technology services group (IT Services) and a finance and accounting services group (F&A Services) to support its operating lines of business. Currently, LDI provides professional architectural and design services for commercial and residential customers. The budgeted cost associated with IT services is $1,250,000 and the budgeted cost of F&A services is $950,000. The budgeted number of F&A services hours was 9,660 and service hours is the allocation base for allocating F&A costs. The budgeted number of IT tickets was 360 and IT tickets is the allocation base for allocating the costs of IT services. Further information is below. F&A Services IT Services Commercial Residential Number of service hours Number of IT tickets 210 550 4,200 4,700 30 10 110 210 Required: 1. Describe the differences between the direct, step-down, and reciprocal methods for allocating support department costs. Explain for full marks. (4 marks) 2. Calculate the total budgeted service department costs allocated to both commercial and residential using the following methods (8 marks) a. Direct method b. Step-down method, F&A services costs are allocated first c. Step-down method, IT services costs are allocated first 3. Which method would you recommend to LDI? Why? Explain for full marks (3 marks) Lauridsen Design Inc. (LDI) is an architectural and design firm located in Calgary, Alberta. LDI has an information technology services group (IT Services) and a finance and accounting services group (F&A Services) to support its operating lines of business. Currently, LDI provides professional architectural and design services for commercial and residential customers. The budgeted cost associated with IT services is $1,250,000 and the budgeted cost of F&A services is $950,000. The budgeted number of F&A services hours was 9,660 and service hours is the allocation base for allocating F&A costs. The budgeted number of IT tickets was 360 and IT tickets is the allocation base for allocating the costs of IT services. Further information is below. F&A Services IT Services Commercial Residential Number of service hours Number of IT tickets 210 550 4,200 4,700 30 10 110 210 Required: 1. Describe the differences between the direct, step-down, and reciprocal methods for allocating support department costs. Explain for full marks. (4 marks) 2. Calculate the total budgeted service department costs allocated to both commercial and residential using the following methods (8 marks) a. Direct method b. Step-down method, F&A services costs are allocated first c. Step-down method, IT services costs are allocated first 3. Which method would you recommend to LDI? Why? Explain for full marks (3 marks)

Answer rating: 100% (QA)

1 Direct Method This method directly allocates support department costs to operating departments without considering any interactions or dependencies ... View the full answer