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 are the total costs to be allocated from Department S2?

Question

Quizplus · Accepted Answer

According to the figure, the total costs to be allocated from Department S2 would equal the expenditures incurred by S2 plus the allocated costs from S1 and S3.

Expenditures incurred by S2 = $7,000 
Allocated costs from S1 = 0.15 x $14,000 = $2,100 
Allocated costs from S3 = 0.65 x $18,000 = $11,700

Total costs to be allocated from Department S2 = $7,000 + $2,100 + $11,700 = $20,800

However, we need to subtract the costs that are directly assigned to the final cost centers (F1, F2, F3, and F4) from this total so that we only allocate costs that are common to multiple cost centers.

Directly assigned costs to F1 = $1,243 
Directly assigned costs to F2 = $2,678 
Directly assigned costs to F3 = $5,322 
Directly assigned costs to F4 = $1,000

Total directly assigned costs = $1,243 + $2,678 + $5,322 + $1,000 = $11,243

Therefore, the final total costs to be allocated from Department S2 = $20,800 - $11,243 = $9,557.

Thus, the correct answer is C.

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