A manufacturing company has two production departments, designated below as P1 and P2, and three service departments, designated below as S1, S2 and S3, and wishes to allocate all factory overhead to production departments. A primary distribution of overhead to all departments has been made and is indicated below. The company makes the secondary distribution of overhead from service departments to production departments on a reciprocal basis, recognising the fact that services of one service department are utilised by another. Data regarding costs and allocation percentages are as follows:

For example, S1 spends 20% of its time and efforts on S2 , 10% on S3, 40% on P1 and 30% on P2. Similarly, the values in respect of S2 and S3 may be interpreted. Now, once the expenses of S1 are apportioned, part of them would go to S2 and S3 while it would also receive a part of the expenses of each of them. The process of apportionment needs to be repeated over and over again until all the expenses get absorbed by the production departments.
Draft this problem as absorbing chains to figure out how to allocate the costs of service departments to production departments and calculate the total costs for each of the two departments.

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Department Direct cost S 55 55 55 Rs 25,000 0 Rs 124,000 20 Percentage allocation of total cost of the department S1 S S3 30 10 0 10 S3 Rs 77,000 10 10 0 P Rs 120,000 40 30 30 P2 Rs 290,000 30 30 50 Total 100 100 100