Motorcade Company has three service departments (S1, S2, and S3) and two product

Question

Motorcade Company has three service departments (S1, S2, and S3) and two production departments (P1 and P2). The following data relate to Motorcade's allocation of service department costs:

Budgeted Cost

S1

$3,080,000

75

S2

2,100,000

50

S3

1,000,000

25

P1

150

P2

225

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

Calculate the total service department cost allocated to each production department P1.

Calculate the total service department cost allocated to production department P1

Budgeted Cost

# of employees

S1

$3,080,000

75

S2

2,100,000

50

S3

1,000,000

25

P1

150

P2

225

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

Calculate the total service department cost allocated to each production department P1.

Explanation / Answer

150 / 225 = .4

.4 x 3080000 = 1232000 S1 - P1

.4 x 2100000 = 840000 S2 - P1

.4 x 1000000 = 400000 S3 - P1

1232000 + 840000 + 400000 = $2472000

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