Rust Company has two support departments (S1 and S2) and two producing departments (X and Y). Department S1 serves departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.

-Refer to the figure.What is S1's cost equation?

Question

Rust Company has two support departments (S1 and S2) and two producing departments (X and Y) . Department S1 serves departments S2, X, and Y in the following percentages, respectively: 10%, 35%, 55%. Department S2 serves departments S1, X, and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.

-Refer to the figure.What is S1's cost equation?

-Refer to the figure.What is S1's cost equation?

Quizplus · Accepted Answer

The cost equation for S1 includes its direct costs ($15,000) plus the portion of S2's costs allocated to S1. Since S2 allocates 6% of its costs to S1, the correct equation is S1 = $15,000 + 0.06S2.

Rust Company Has Two Support Departments (S1 and S2) and Two