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:
$$\begin{array}{r}
{ \text { Proportion of Services Used by: } } \
\begin{array} { c l c c c c }
\text { Department } & \text { Direct costs } & \text { S1 } & \text { S2 } & \text { P1 } & \text { P2 } \
\text { S1 } & \$ 60,000 & & 0.70 & 0.10 & 0.20 \
\text { S2 } & \$ 100,000 & 0.20 & & 0.30 & 0.50 \
\text { P1 } & \$ 160,000 & & & & \
\text { P2 } & \$ 140,000 & & & &
\end{array}\end{array}$$
-
Under the direct method of cost allocation, the amount of S1 costs allocated to 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:
$$\begin{array}{r}
 { \text { Proportion of Services Used by: } } \
  \begin{array} { c l c c c c } 
\text { Department } & \text { Direct costs } & \text { S1 } & \text { S2 } & \text { P1 } & \text { P2 } \
\text { S1 } & \$ 60,000 & & 0.70 & 0.10 & 0.20 \
\text { S2 } & \$ 100,000 & 0.20 & & 0.30 & 0.50 \
\text { P1 } & \$ 160,000 & & & & \
\text { P2 } & \$ 140,000 & & & &
\end{array}\end{array}$$
-
Under the direct method of cost allocation, the amount of S1 costs allocated to S2 would be:
A) $42,000.
B) $20,000.
C) $0.
D) $6,000.

Quizplus · Accepted Answer

Under the direct method, service department costs are allocated only to production departments, not to other service departments. Therefore, S1 costs are not allocated to S2.

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