Carolina Stoneware Company manufactures pottery in two production departments, P1 and P2. The production departments receive services from four support departments, S1, S2, S3 and S4, which also provide some services to each other.

The costs of operating the support departments for last year are as follows:

Dept. Costs

Dept. S1 $12,000

Dept. S2 15,000

Dept. S3 10,000

Dept. S4 25,000

The percentages of service provided by the support departments to other departments are:

To

S1 S2 S3 S4 P1 P2

From S1 -- 10% 10% 5% 30% 45%

S2 10% -- 30% 10% 35% 15%

S3 20% 20% -- 10% 30% 20%

S4 15% 10% 15% -- 20% 40%

REQUIREMENTS:

a. Develop the equations needed to allocate support department costs to other departments using the reciprocal method.

b. Using excel, calculate the allocation of the support department costs to other departments and the total amount allocated to each production department. Since you are not given the direct overhead in the production departments, you are not able to calculate the total overhead for each department.