Crandall Company has two production departments (P1 and P2) and three service departments (S1, \($2,\) and S3). Service department costs are allocated to production departments using the direct method. The \($400,000\) costs of department S1 are allocated based on the number of employees in each production department. The \($600,000\) costs of department S2 are allocated based on the square footage of space occupied by each production department. The \($300,000\) costs of department S3 are allocated based on hours of computer support used by each production department. Information for each production department follows.

Required

a. Calculate the service department costs that are allocated to each production department.

b. In general, do generally accepted accounting principles allow for the allocation of service department costs to production departments for the purpose of valuing inventory?

Transcribed Image Text:

Square Production Department Number of Employees Feet Computer Support Occupied Hours P1 20 3,000 10,000 P2 80 6,000 15,000 Total 100 9,000 25,000