Chapter 11, Problem 50P

Solve for Unknowns: Direct Method

Frank’s Foods has a warehouse that supplies products to its store locations. The warehouse has two service departments, Information Services (S1) and Operation Support (S2), and two operating departments, Order Processing (P1) and Delivery (P2). As an internal auditor, you are checking the company’s procedures for cost allocation. You find the following cost allocation results for September:

Total costs for the two service departments are $120,000.

Operation Support’s services are provided as follows:

• percent to Order Processing.
• percent to Delivery.

The direct method of allocating costs is used.

Required

1. a.      What are the total service department costs (S1 + S2) allocated to P2?
2. b.      Complete the following:

1. c.       What proportion of S1’s costs were allocated to P1 and P2?