QUESTION THREE

Human Resources (H.R.), Data Processing (D.P.), and Risk Management (R.M.) provide services to the

Machining and Assembly production departments, and in some cases, the service departments also

provide services to each other. The following information is provided:

Servic

e

Dept

% of services provided by the service department listed at left

to:

H.R. D.P. R.M. Machining Assembly

H.R. -- 20% 10% 40% 30%

D.P. 8% -- 7% 30% 55%

R.M. -- -- -- 50% 50%

Total cost

allocated

Sh

H.R. 80,000

D.P. 120,000

3

R.M.

Machining

Assembly

40,000

460,000

600,000

1,300,000

The amounts in the far left column are the costs incurred by each service department. Any services that a

department provides to itself are ignored, so the intersection of the row and column for each service

department shows zero

Required:

Apportion the production overhead costs of the service cost centres to the production cost centres using

either the repeated distribution method or the algebraic method (25 marks)