Question

# Question 1 (1 point) Motorcade Company has three service departments (S1, S2, and S3) and two...

Question 1 (1 point)

 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 \$3,360,000 75 S2 2,120,000 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

Total service department costs = \$3,360,000 + \$2,120,000 + \$1,000,000 = \$6,480,000

Total no. of employees of production departments = 150 + 225 = 375

Cost allocation to production department P1 = Total costs x (No. of employees of P1 department / Total no. of employees of production departments)

or, Cost allocation to production department P1 = \$6,480,000 x (150 / 375) = \$2,592,000

Cost allocation to production department P2 = \$6,480,000 x (225 / 375) = \$3,888,000

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