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 Costs Nbr of Employees S1 $3,200,000 75 S2 2,540,000 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 production department P1

Explanation / Answer

Motorcade Company All Amounts in $ Department wise Cost Allocation Service Department Costs S1 S2 S3 Total Costs 3200000 2540000 1000000 6740000 No. of Employees 75 50 25 150 No. of employees in P1 150 Cost of Service Department allocated 2696000

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