Motorcade Company has three service departments (S1, S2, and S3) and two product
ID: 2633858 • Letter: M
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 Costs
Nbr of Employees
S1
$3,080,000
75
S2
2,300,000
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
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 Costs
Nbr of Employees
S1
$3,080,000
75
S2
2,300,000
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
Compute share of department P1 in total budgeted cost of all three service department in following manner:
First find the sum of budgeted cost.
Total budgeted cost = budgeted cost S1 + budgeted cost S2 + budgeted cost S3 = $3,000,000 + 2,220,000 + 1,000,000 = $6,220,000
Thus, total budgeted cost is $6,220,000.
Secondly find the total number of employees of production departments.
Total number of employees of production departments = Number of employees P1 + Number of employees P2 = 150 + 225 = 375
Thus, total numbers of employees in production department are 375.
Now, compute total budgeted costs of service departments allocated to production department P1 as follows:
Share of P1 = (Total budgeted costs / Total number of employees in production department)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.