Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows:

				Proportion of Services Used by:
Department	Direct costs			S1		S2		P1		P2
S1	$	60,000				0.70		0.10		0.20
S2	$	100,000		0.20				0.30		0.50
P1	$	160,000
P2	$	140,000

Under the reciprocal method what is the algebraic solution to the cost allocation problem?

Multiple Choice

• S1 = 60,000 + .70(S2)

  S2 = 100,000 + .20(S1)

• S1 = 100,000 + .70(S2)

  S2 = 60,000 + .20(S1)

• S1 = 60,000 + 20(S2)

  S2 = 100,000 + .70(S1)

• S1 = 100,000 + .20(S2)

  S2 = 60,000 + .70(S1)