Interdepartment Services: Direct Method Tucson Manufacturing Company has five op

Question

Interdepartment Services: Direct Method Tucson Manufacturing Company has five operating departments, two of which are producing departments (P1 and P2) and three of which are service departments (S1, S2, and S3). All costs of the service departments are allocated to the producing departments. The following table shows the distribution of services from the service departments.

  Services provided to

The direct operating costs of the service departments are as follows:

Using the direct method, prepare a schedule allocating the service department costs to the producing departments.

Do not round while completing your calculations.

Services
provided
from S1 S2 S3 P1 P2 S1 ----- 5% 25% 50% 20% S2 10% ---- 5 45 40 S3 15% 5 ------ 20 60

Explanation / Answer

Using the direct method, prepare a schedule allocating the service department costs to the producing departments.

S1 S2 S3 P1 P2 Direct operating costs 63000 255000 21000 Allocation of S1 cost (63000) 45000 18000 Allocation of S2 cost (255000) 135000 120000 Allocation of S3 cost (21000) 5250 15750 Total cost - - - 185250 153750

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