Allocating Service Department Costs.Commercial Products, Inc., has two production departments (P1 and P2) and three service departments (S1, S2, 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.

Production Number Square Feet Computer Support

Dept Employees Occupied Hours

P1 20 3000 10000

P2 80 6000 15000

total 100 9000 250000

Required:

1. Calculate the service department costs allocated to each production department.
2. In general, does U.S. GAAP allow for the allocation of service department costs to production departments for the purpose of valuing inventory?

a. S1 Total Allocated 400,000 S2 Total Allocated 600,000 S3 Total Cost Allocated 300,000

b. S1 Total Allocated 400,000 S2 Total Allocated 600,000 S3 Total Cost Allocated 400,000

c. S1 Total Allocated 500,000 S2 Total Allocated 600,000 S3 Total Cost Allocated 300,000

d. S1 Total Allocated 400,000 S2 Total Allocated 800,000 S3 Total Cost Allocated 300,000

The following activities and costs are for Collins Company.

1. Direct materials used by workers to assemble products
2. Factory building rent
3. Machines set up to produce groups of products
4. New product research and development
5. Maintenance performed on the factory building
6. Direct labor assembling products
7. Product designed for a specific customer
8. Purchase requisitions issued for raw materials

Required:

A. Determine whether each item is a facility-level, product- or customer-level, batch-level, or unit-level cost.

a. 1. Unit-level cost 2. Facility-level cost 3. Batch-level cost 4. Product/customer-level cost 5. Facility-level cost 6. Unit-level cost 7. Product/customer-level cost 8. Batch-level cost

b. 1. Product/customer level cost 2. Unit-level cost 3. Batch-level cost 4. Product/customer-level cost 5. Facility-level cost 6. Unit-level cost 7. Product/customer-level cost 8. Batch-level cost

c. 1. Batch level cost 2. Facility-level cost 3. Batch-level cost 4. Product/customer-level cost 5. Facility-level cost 6. Batch level cost 7. Product/customer-level cost 8. Batch-level cost

d. 1. Facility 2. Facility-level cost 3. Batch-level cost 4. Product/customer-level cost 5. Facility-level cost 6. Unit-level cost 7. Product/customer-level cost 8. Facility level cost