Departmental Cost Allocation
Robinson Products Company has two service departments (S1 and S2) and two production departments (P1 and P2). The distribution of each service department’s efforts (in percentages) to the other departments is
| To | |||
From | S1 | S2 | P1 | P2 |
S1 | — | 10% | 20% | ?% |
S2 | 10% | — | ?% | 30% |
The direct operating costs of the departments (including both variable and fixed costs) are
S1 | $180,000 |
S2 | 60,000 |
P1 | 50,000 |
P2 | 120,000 |
Required
1. Determine the total cost of P1 and P2 using the direct method.
2. Determine the total cost of P1 and P2 using the step method.
3. Determine the total cost of P1 and P2 using the reciprocal method.
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