Exercise - Allocation of Service Department costs
Marvin Company has three service departments, $1, $2, and $3, and two production departments, P1 and P2. The following data relate to Marvin's allocation of service department costs:
Budgeted Costs Number of Employees
$1 $4,000,000 80
$2 3,000,000 60
$3 2,000,000 30
P1 200
P2 300
Service department costs are allocated by the direct method. The number of employees is used as the allocation base for all service department costs.
Required -
a. Allocate service department costs to production departments.
b. Calculate the total service department cost allocated to each production department.