Question
1.A company has two service departments (S1 and S2) and two manufacturing divisions (M1 and M2). The following information is available. Percent Allocable to Costs
1.A company has two service departments (S1 and S2) and two manufacturing divisions (M1 and M2). The following information is available.
Percent Allocable to
Costs Incurred Service Department S1 S2 M1 M2
$290,000 S1 - 20% 30% 50%
500,000 S2 50% - 20% 30%
Required: Determine how the total service department costs are allocated to the manufacturing division using the direct method.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Answer To allocate the total service department costs to the manufacturing divisions using the direct method we can follow these steps 1 Calculate the total costs allocated to each service department For Service Department S1 290000 For Service Department S2 500000 2 Allocate the costs from each service department to the manufacturing divisions based on the percentages provided For Service Department S1 Allocate 20 to M1 290000 20 58000 Allocate 30 to M2 290000 30 87000 For Service Department S2 Allocate 50 to M1 500000 50 250000 Allocate 20 to M2 500000 20 100000 Therefore the total service department costs allocated to each manufacturing division ...
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Step: 2
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Survey of Accounting
Authors: Carl S Warren
5th Edition
9780538489737, 538749091, 538489731, 978-0538749091
