Crusoe Crates Company has two service departments (S1 and S2) and two production departments (P1 and P2). The distribution of each service department's efforts (in percentages) to the other departments is:

To:

S1 S2 P1 P2

From:

S1 0% 10% 30% 60%

S2 25% 0% 35% 40%

The direct operating costs of the departments (including both variable and fixed costs) are:

S1 $150,000

S2 $85,000

P1 $320,000

P2 $400,000

Total $955,000

Determine the total cost of P1 and P2 using the direct method.

Determine the total cost of P1 and P2 using the step method and allocating S1 first.