Questions 3-5 are based on the following information.

A company has two service departments (S1 and S2) and two production departments (P1 and P2). The following information is available for all four departments.

S1 S2 Service dept. costs $27,000 $18,000

For services provided to: Service dept 1 (S1) N/A 20% Service dept 2 (S2) 10% N/A Production dept 1 (P1) 50% 30% Production dept 2 (P2) 40% 50%

Using the Sequential (aka Step) Method, the company allocates the costs of S1 to S2 as well as to the production departments (P1, P2). What proportion of S1 costs are allocated to S2?

Answer is 20%, please show how to get to this solution