Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2.Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows:
Under the direct-method of cost allocation,the amount of S1 costs allocated to the S2 would be:
A) $42,000.
B) $20,000.
C) $0.
D) $6,000.

Question

Cordner Corporation has two production Departments: P1 and P2 and two service departments: S1 and S2.Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: 
Under the direct-method of cost allocation,the amount of S1 costs allocated to the S2 would be:
A) $42,000. 
B) $20,000. 
C) $0. 
D) $6,000.

Quizplus · Accepted Answer

Under the direct-method of cost allocation, service department costs are allocated only to production departments, and not to other service departments. Therefore, no amount of S1 costs would be allocated to S2, making the answer C ($0) correct.

Cordner Corporation Has Two Production Departments: P1 and P2 and Two