Campaign Printing has two service departments, S1 and S2, andtwo production departments, P1 and P2.
The data for May were as follows:
| | Services provided to: |
Activity | Pre-allocation Costs | S1 | S2 | P1 | P2 |
S1 | $90,000 | | 10% | 40% | 50% |
S2 | $60,000 | 20% | | 55% | 25% |
| Pre-allocation Costs | | | | |
P1 | $360,000 | | | | |
P2 | $520,000 | | | | |
Required:
Allocate service departments costs (S1 & S2) to theproduction departments (P1 & P2) using reciprocalmethod
- Set up linear equations to solve for the totalcosts incurred in S1 and S2. (Note: if you use repeated iteration,you won’t get any points!!!)
- Determine total costs for each department byfirst solving the equations from part i. and then performing thenecessary allocation. (note: round to the nearest integer)
