QUESTION 3 Mars Ltd manufactures sewing machines used in textile factories. The firm has two operating departments (Machinery Department and the Assembly Department) in its manufacturing facility. The firm also has

two support departments (Quality Assurance and Maintenance Department). The usage of these two support departments' output for 2022 was as follows: User of Services Budgeted manufacturing overhead costs before inter- department cost allocations Support work supplied by: Quality Assurance Maintenance Support departments Quality Machinery Assurance Maintenance Department 650,000 AND 0% 20% 550,000 Operating departments Assembly Department 25% 800,000 Page 4 of 5 45% 50% 1,800,000 Required: Answer ALL parts. a) Use the direct method to allocate the budgeted costs of the support departments to the operating departments. [5 MARKS] 30% 30% AND b) Use the step-down method to allocate budgeted costs of the support departments to the operating departments. You should prioritize the service department that does the largest proportion of work to other service departments [7 MARKS] AND c) Use the reciprocal method to allocate the budgeted costs of the support departments to the operating departments. [8 MARKS] d) Explain what the purposes are of cost allocation and illustrate your answer by reference to one or more relevant examples. [10 MARKS]