Reference no: EM131826983

Exercise - Allocation of Service Department costs

Marvin Company has three service departments, $1, $2, and $3, and two production departments, P1 and P2. The following data relate to Marvin's allocation of service department costs:

           Budgeted Costs        Number of Employees

$1            $4,000,000               80

$2              3,000,000               60

$3              2,000,000               30

P1                                           200

P2                                           300

Service department costs are allocated by the direct method. The number of employees is used as the allocation base for all service department costs.

Required -

a. Allocate service department costs to production departments.

b. Calculate the total service department cost allocated to each production department.