Required information [The following information applies to the questions displayed below.] The following information is departmental...
Required information
[The following information applies to the questions displayed below.]
The following information is departmental cost allocation with two service departments and two production departments.
|
Percentage Service Provided to |
|||||||||||||||
| Department | Cost | S1 | S2 | P1 | P2 | ||||||||||
| Service 1 (S1) | $ | 44,000 | 0 | % | 20 | % | 40 | % | 40 | % | |||||
| Service 2 (S2) | 34,000 | 20 | 0 | 20 | 60 | ||||||||||
| Production 1 (P1) | 240,000 | ||||||||||||||
| Production 2 (P2) | 290,000 | ||||||||||||||
What is the amount of service department cost allocated to P1 and P2 using the direct method if the cost in P1 is changed from $240,000 to $260,000?
|
Homework Answers
Answer : Total Cost Allocated to P1 is $30500 and to P2 is $47500
Total cost of S1 to be allocated is 44000. S1 provides 40% service to P1 and 40% to P2. Hence cost of S1 allocated to P1 and P2 is as below
Allocation to P1 = (40)/(40+40)*44000 = $22000
Allocation to P2 = (40)/(40+40)*44000 = $22000
Total cost of S2 to be allocated is 34000. S1 provides 20% service to P1 and 60% to P2. Hence cost of S2 allocated to P1 and P2 is as below
Allocation to P1 = (20)/(20+60)*34000 = $8500
Allocation to P2 = (60)/(20+60)*34000 = $25500
Hence total cost allocation to P1 = 22000+8500 = $30500
Hence total cost allocation to P2 = 22000+25500 = $47500
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