Cost Accounting: Direct Method

Your company has 2 support departments, S1 and S2. They help the productions departments, P1 and P2. Driver 1 is the cost driver for S1. Driver 2 is the cost driver for S2. Allocate overhead costs from the support departments to the producing departments using the reciprocal method. Compute the allocation ratios Use algebra to solve for the amount to allocate from each support department. Allocate from support departments to producing departments