221_Solutions_Chap_7_2nd_set_Fa_05

221_Solutions_Chap_7_2nd_set_Fa_05 - E7-21 Service...

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E7 - 21 Producing Service Departments Departments S1 S2 S3 P1 P2 Service dept. costs $ 42,000 $ 85,000 $ 19,000 S1 allocations: (42,000) $42,000 × (50/70) $30,000 $42,000 × (20/70) $12,000 S2 allocations: (85,000) $85,000 × (45/85) 45,000 $85,000 × (40/85) 40,000 S3 allocations: (19,000) $19,000 × (20/80) 4,750 $19,000 × (60/80) ______ ______ ______ ______ 14,250 Total costs $ 0 $ 0 $ 0 $79,750 $66,250 Note that the direct method gives no recognition to interdepartmental services, which are potentially significant in this exercise. Instructors assigning this exercise might also assign E7-22 or solve it in class. E7 - 22 The service department costs are allocated in the following order: 1st: S1 (provided 30% of its services to other service departments); 2nd: S3 (provided 20% of its services to other service departments); 3rd: S2 (provided 15% of its services to other service departments). Producing Service Departments Departments S1 S3 S2 P1 P2 Service dept. costs $ 42,000 $ 19,000 $ 85,000 S1 allocations: (42,000) $42,000 × (25/100) 10,500 $42,000 × (5/100) 2,100
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