The following information is departmental cost allocation with two service departments and two production departments. Percentage Service Provided to Department Cost S1 S2 P1 P2 Service 1 (S1) $ 47,000 0 % 20 % 40 % 40 % Service 2 (S2) 37,000 20 0 20 60 Production 1 (P1) 270,000 Production 2 (P2) 320,000 What is the amount of service department cost allocated to P1 and P2 using the direct method if the cost in P1 is changed from $270,000 to $290,000?
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The following information is departmental cost allocation with two service departments and two production departments.
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Percentage Service Provided to |
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| Department | Cost | S1 | S2 | P1 | P2 | |||||||||||
| Service 1 (S1) | $ | 47,000 | 0 | % | 20 | % | 40 | % | 40 | % | ||||||
| Service 2 (S2) | 37,000 | 20 | 0 | 20 | 60 | |||||||||||
| Production 1 (P1) | 270,000 | |||||||||||||||
| Production 2 (P2) | 320,000 | |||||||||||||||
What is the amount of service department cost allocated to P1 and P2 using the direct method if the cost in P1 is changed from $270,000 to $290,000?
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>Service department cost is allocated to production departments using various methods like: |
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#1: Direct method |
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#2: Step Method |
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#3: Reciprocal method |
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>Direct method of cost allocation is used to allocate the service department cost 'directly' to the production departments. |
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>This means that the cost of one service department is not allocated to any other service department. |
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