Question

Interdepartment Services: Step Method
Tucson Manufacturing Company has five operating departments, two of which are producing departments (P1 and P2) and three of which are service departments (S1, S2, and S3). All costs of the service departments are allocated to the producing departments. The following table shows the distribution of services from the service departments.

	Services provided to
Services provided from	S1	S2	S3	P1	P2
S1	--	5%	25%	50%	20%
S2	10%	--	5	45	40
S3	15	5	--	20	60

The direct operating costs of the service departments are as follows:

S1	$63,000
S2	170,000
S3	16,000

Using the step method, prepare a schedule for Tucson Manufacturing Company allocating the service department costs to the producing departments. (Round calculations to the nearest dollar.)

	Service Departments			Producing Departments
	S1	S2	S3	P1	P2
Total costs	Answer	Answer	Answer	Answer	Answer

Answer 1

Solution:

Prepare a schedule for Tucson Manufacturing Company allocating the service department costs to the producing departments: S2 P2 STATEMENT SHOWING ALLOCATION OF SERVICE DEPARTMENTS COSTS TO THE PRODUCING DEPARTMENTS Service provided to Operating Service provided from Cost Basis for allocation si S3 P1 si $ 63,000.00 0%-5%-25%-50%-20% S $ 3,150.00 $ 15,750.00 $ 31,500.00 $ 12,600.00 S2 $ 170,000.00 10%-0%-5%-45%-40% $ 17,000.00 $ $ 8,500.00 $ 76,500.00 $ 68,000.00 S3 $ 16,000.00 15%-5%-0%-20%-60% $ 2,400.00 $ 800.00 $ $ 3,200.00 $ 9,600.00 $ 19,400.00 S 3,950.00 $ 24,250.00 S 111,200.00 $ 90,200.00 $ (24,250.00) S3 cost allocation Si cost allocation S2 cost allocation $ 24,250.00 15%-5%-0%-20%-60% $ 3,637.50 $ 1.212.50 $ 23,037.500-5/75 - 0 - 50/75 -20/75 $ (23,037.50 $ 1,535.83 $ 6,698.33 0 - 0 - 0 - 45/85 - 40/85 $ $6,698.33) $ 4.850.00 $ 14,550.00 $ 15,358.33 $ 6,143.33 $ 3,546.17 $ 3,152.16 Total Costs $ $ 134,954.5 S 114,045.49 Therefore, prepared the schedule for Tucson Manufacturing Company allocating the service department costs to the producing departments.

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