Company has three service departments, X, Y and Z and two production departments, P1 and P2.
Costs in Departments X and Y are allocated based on square feet and costs in Department Z are allocated based on direct labor hours.
The following data are available:
Direct costs Square feet occupied Direct labor hours
Service Department:
X $300,000 6,000 13,000
Y $225,000 4,000 7,000
Z $480,000 2,000 4,000
Producing Department:
P 1 $750,000 10,000 20,000
P 2 $600,000 6,000 10,000
Assume the direct method of allocating service department costs is used.
Required:
A) What is the total cost of Producing Department P1 after allocating the service departments' costs?
B) What is the total cost of Producing Department P2 after allocating the service departments' costs?