Question 3
1. Step- wise We reappointed the service department G to next department.

G allocate 60% to Production department 1, 30% to department 2 and 10% to service department H. That is, 160*60%= 96 to Production department 1, 160*30%=48 to production department 2 and 16 to Service department H. After this allocation, service H has 96 in total, then allocate this through the percentage, 50% to production department 1, 30% to department 2, which is 98*50%/(1-20%)= 61.25, and 98*30/(120)= 36.75. Internal G H Production Production Total service department 1 department2 G 160 82 96 48 1802 H 16 98 61.25 36.75 Overhead 870 690 Total 1027.25 774.75 2. Reciprocal Let G = service department G overheads H= service department H overheads. G= 160+0.2H H=82+0.1G, solve these two equations, which can get G =180, H=100. 180*90%=162, 100*80%=80 Internal G H Production Production service department1 department2 G 162 6/9*162=108 3/9*162=54 H 80 5/8*80=50 3/8*80=30 Overhead 870 690 Total 1028 774 overhead

3. In step-wise method, G allocate 60% to Production department 1, 30% to department 2 and 10% to service department H. That is, 160*60%= 96 to Production department 1, 160*30%=48 to production department 2 and 16 to Service department H. After this allocation, service H has 96 in total, then allocate this through the percentage, 50% to production department 1, 30% to department 2, which is 98*50%/(1-20%)= 61.25, and 98*30/(1-20)= 36.75. Total overheads in department 1 is 1027.25, in department 2 is 774.75. In reciprocal method Let G = service department G overheads H= service department H overheads. G= 160+0.2H H=82+0.1G, solve these two equations, which can get G =180, H=100. 180*90%=162, 100*80%=80