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Running head: ACCOUNTING
a. The best approach to show allocation of maintenance department cost to the cutting
depatment is the use of direct method as shown below.
The maintenance cost that should be allocated to the
Allocation basis for maintenance cost
The allocation ratio based in direct methods
The share of maintenace cost that should be allocated
to cutting department is (50,000×7/15)
Thus, the maintenance cost that should be allocated to
cutting department is 23,333
b. The statement indicating the allocation of support department cost to the packaging
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