Question

McDuff Company uses a job-order costing system to compute product costs. There are two producing departments (P1 and P2) and two support departments (S1 and S2). The costs incurred in S1 and S2 are allocated to Departments A and B and included in their factory overhead rates for costing products. S1 costs are allocated based on the number of employees, S2 costs are allocated based on direct labor hours, and the production departmental overhead rates are also based on direct labor hours. The following data are available for a recent period:

​ S1 S2 P1 P2
Direct department costs   $12,000   $18,000   $70,000   $117,500
Number of employees 8 12 48 72
Direct labor hours 450 325 2,250 1,800
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Required:
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    Prepare a schedule allocating the support department costs to the producing departments using the sequential allocation method. The department with the greatest percentage of interdepartmental services should be allocated first. 15 points
      
     

Answer 1