Cordner Corporation has two production departments, P1 and P2, and two service departments, S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows: Proportion of Services Used by:DepartmentDirect costsS1S2P1P2S1$ 146,000 0.700.100.20S2$ 187,0000.20 0.300.50P1$ 178,000 P2$ 179,000 Under the direct method of cost allocation, the amount of S1 costs allocated to P1 would be:Note: Do not round intermediate calculations. $14,600. $148,500. $58,667. $48,667.

Direct method of overhead allocation means a method where overhead of support department is direct allocated to production department. Nothing is allocated from one service department to another service department. SOLUTION FOR CORDNER CORPORATION Direct cost of S1 = $ 146,000 Ratio of services from S1 to P1 and P2 = 0.10 : 0.20 = 1 : 2 Overhead allocated from S1 to P1 = 146000 * 1/3 Overhead allocated from S1 to P1 = $ 48,667 Hence, the right answer is OPTION D , $ 48,667 , Amount of cost allocated from S1 to P1 under direct method of cost allocation.

Answered: Cordner Corporation has two production…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Cordner Corporation has two production departments, P1 and P2, and two service departments, S1 and S2. Direct costs for each department and the proportion of service costs used by the various departments for the month of July are as follows:

		Proportion of Services Used by:
Department	Direct costs	S1	S2	P1	P2
S1	$ 146,000		0.70	0.10	0.20
S2	$ 187,000	0.20		0.30	0.50
P1	$ 178,000
P2	$ 179,000

Under the direct method of cost allocation, the amount of S1 costs allocated to P1 would be:

Note: Do not round intermediate calculations.

$14,600.
$148,500.
$58,667.
$48,667.

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