Craylon Corp has two service departments, S1 and S2, and two production departments, P1 and P2....

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Question

Craylon Corp has two service departments, S1 and S2, and two production departments, P1 and P2....

Craylon Corp has two service departments, S1 and S2, and two production departments, P1 and P2.

The data for April were as follows:

		Services provided to:
Activity	Costs	S1	S2	P1	P2
S1	$100,000		20%	40%	50%
S2	$80,000	10%		55%	25%
	Fixed Costs
P1	$400,000
P2	$500,000

Required:

Allocate the service departments' (S1 & S2) costs to the two operating divisions using the reciprocal method.

business accounting

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Answer 1

Answer #1

	To
From	S1	S2	P1	P2
Department cost	$ 1,00,000	$ 80,000	$ 4,00,000	$ 5,00,000
S1	$ -1,11,134	$ 20,206	$ 40,412	$ 50,515
S2	$ 11,134	$ -1,00,206	$ 61,237	$ 27,835
Total Cost	$ -	$ -	$ 5,01,649	$ 5,78,351

Workings:
Let Total Administrative department cost be x and Accounting Department be y
x = 100000 + (10/90 * y)
y = 80000 + (20/110 * x)
By solving above:
y = 80000 + (20/110 * x)
y = 80000 + (20/110 * (100000 + (10/90 * y)))
y = $ 100206
also,
x = 100000 + (10/90 * y)
x = 100000 + (10/90 * 100206)
x = $111134

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Answer 2

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