QUESTION 1 Office Space Ltd sells office furniture. The company has two production departments: Assembly and Finishing. There are three support departments: Material Handling, Equipment Maintenance, and Quality Control. The budgeted

overhead costs for 2021 for each department are as follows. Material Handling Equipment Maintenance Quality Control Assembly Finishing The usage of the support departments' output for the year is as follows: Material handling Support Departments Production Departments User of the Service: Material Handling 850,000 225,000 125,000 634,000 342,000 Equipment Maintenance Quality Control Assembly Finishing 45% 55% Equipment Quality Maintenance Control 10% 8% 5% 35% 52% 12% 20% 58%/nRequired: a) Use the step down method to allocate the budgeted costs of the support departments (Material Handling, Equipment Maintenance, and Quality Control) to the Assembly and Finishing Department. [5 marks] AND b) Use the reciprocal method to allocate the budgeted costs of the support departments (Material Handling, Equipment Maintenance, and Quality Control) to the Assembly and Finishing Departments. [15 marks] AND c) The general manager of OfficeSpace has asked you to prepare a report discussing which method is likely to be most helpful to the company. He has also requested that you make a recommendation in that report with regards to whether the company should use a predetermined overhead rate instead of an actual overhead rate. Explain your answer. [10 marks] Page 2 of 5