Service department costs are allocated by the direct method. The number of employees is used as the allocation base for all service department costs.

1, Allocate service department costs to production departments.

Service		Service dept.		Cost Allocated to
Department		Costs		P1		P2

S1		$4,355,000		$		$
S2		2,923,000		$
S3		2,840,000		$

2, Calculate the total service department cost allocated to each production department.

Service dept.		Cost Allocated to
		Costs		P1		P2
Total cost		$		$		$

$4,355,000 2,923, 2,840, 54 3 9 200 300