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The ABC Company manufactures products X and Y in two departments Product X in department P1 and Product Y in department P2, which are assisted by three service departments, namely departments S1, S2 and S3. The three service departments provide services to each other. The management of the company is in the planning phase for the next financial year. As management accountant, you were asked by management to provide them with a schedule showing the cost alocation of the service departments to the production departments, since they need the production cost for each product in their planning Service department allocation is done by using the direct-method, but management would like to recognise the service provided among the service departments. No distinction is made between fixed and variable service department cost. Allocation is firstly done for department S1, then for S2 and finally for service department S3 The costs of service departments are allocated to the other departments as follows: Department S1 Direct machine hours Department S2 Direct labour hours Department S3 Square meters occupied The following budgeted information is given to you for the next financial year. Service departments Production departments S1 S2 S3 P1.Prod.X P2 Prod. Y R R R R R Direct costs: Direct material ? Direct labour Overhead: Manufacturing 75 000 45 000 Service departments 20 000 15 000 10 000 Other information: Direct labour hours 2 500 3 000 4 000 5 000 Direct machine hours 1 500 2 500 5 000 4 000 Square metres occupied 500 750 500 5 000 2000 Number of units to Produce 5 000 10 000 Direct material cost per Unit 15.00 5.00 Direct labour cost per hour 6.25 12.50 - . REQUIRED Use the reciprocal-method to allocate the costs of the service departments to production departments and provide management with the selling price of each product, if Company's policy is a mark-up 50% on the cost price per unit (10) CS Scanned with CamScanner

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