Question

In: Accounting

Motorcade Company has three service departments (S1, S2, and S3) and two production departments (P1 and...

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:

Round to two decimal places.

Budgeted Costs

Nbr of Employees

S1

$3,120,000

75

S2

2,060,000

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

Solutions

Expert Solution

Number of employees in department P1 = 150

Number of employees in department P2 = 225

Total employees in Department P1 and P2 = Number of employees in department P1 + Number of employees in department P2

= 150 + 225

= 375

S1 Department cost allocated to department P1 = S1 department cost x Number of employees in department P1/Total employees in Department P1 and P2

= 3,120,000 x 150/375

= $1,248,000

S2 Department cost allocated to department P1 = S2 department cost x Number of employees in department P1/Total employees in Department P1 and P2

= 2,060,000 x 150/375

= $824,000

S3 Department cost allocated to department P1 = S3 department cost x Number of employees in department P1/Total employees in Department P1 and P2

= 1,000,000 x 150/375

= $400,000

cost allocated to production department P1
S1 1,248,000
S2 824,000
S3 400,000
Total service department cost allocated to production department P1 $2,472,000

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