Interdepartment Services: Direct Method Wilhelm Manufacturing Company has five o

ID: 2575263 • Letter: I

Question

Interdepartment Services: Direct Method
Wilhelm 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.

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

Using the step method, prepare a schedule for Wilhelm Manufacturing Company allocating the service department costs to the producing departments. (Round calculations to the nearest dollar. Do not round until your final answers.)

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

Explanation / Answer

Allocation of costs in service and production department:

Allocation of cost of S1 (98000) (A)

98000*5% =4900

98000*25% = 24500

98000*50% = 49000

98000*20% = 19600

Allocation of cost of S2 (187000)(B)

187000*10% = 18700

187000*5% = 9350

187000*45% = 84150

187000*40% = 74800

Allocation of cost of S3 (36000)(C)

36000*15% = 5400

36000*5% = 1800

36000*20% = 7200

36000*60% = 21600

TOTAL COSTS(A+B+C)

24100

6700

33850

140350

116000