*Use the following information to answer the following three questions:

A company has two service departments (S1 and S2) and two manufacturing divisions (M1 and M2). The following information is available.

ServiceDepartment	Costs Incurred	Cost allocation Base	Amount of service used by
			S1	S2	M1	M2
S1	$180,000	Machine hours (MH)		1,000 MH	6,000 MH	3,000 MH
S2	$70,000	Square footage (SF)	2,000 SF		1,500 SF	4,500 SF

Using the direct method, how much of the service department costs will be allocated to M1?

	A.	$125,000
	B.	$137,500
	C.	$132,450
	D.	$121,125

Using the step method (starting from S1), how much of the service department costs will be allocated to M1?

	A.	$127,400
	B.	$124,500
	C.	$130,000
	D.	$125,500

Using the reciprocal method, how should the total service department costs of S1 be expressed?

	A.	S1 = $180,000 + 0.25 S2
	B.	S1 = $180,000 + 0.1 S2
	C.	S1 = $70,000 + 0.25 S2
	D.	S1 = $70,000 + 0.9 S2