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Demonstration Problem 1 Kirby Industries has two service departments (S1 and S2) and three production...

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Demonstration Problem 1 Kirby Industries has two service departments (S1 and S2) and three production d P2, and P3). The following table shows the costs incurred at the two service departments, as well as the proportion of services provided by the two service departments to the other depa rtments. Costs Service Percent Allocable to Incurred Department $1 S2 20% Pl P2 P3 30% -20% 40% 15% 10% 25% $1,000,000 S 260.000 S2 40% For exampie, service department S1 incurred S1,000,000 while providing 20 percent of its services to service department S2, 30 percent to production department P1, 40 percent to production department P2, and 10 percent to production department P3 For simplicity, the direct costs incurred by the production departments are ignored. The general manager of Kirby Industries wanted to know how the service department costs can be allocated to the production departments in order to facilitate performance evaluation. Required: Allocate the service department costs to the production departments using the direct method

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