Cordner Corporation Has Two Production Departments, P1 and P2, and Two

question 38

Multiple Choice

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:
$$\begin{array}{r} { \text { Proportion of Services Used by: } } \\ \begin{array} { c l c c c c } \text { Department } & \text { Direct costs } & \text { S1 } & \text { S2 } & \text { P1 } & \text { P2 } \\\text { S1 } & \$ 60,000 & & 0.70 & 0.10 & 0.20 \\\text { S2 } & \$ 100,000 & 0.20 & & 0.30 & 0.50 \\\text { P1 } & \$ 160,000 & & & & \\\text { P2 } & \$ 140,000 & & & &\end{array}\end{array}$$
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Under the step method of cost allocation, the amount of S2 costs allocated to S1 would be:

• A) $40,000.
• B) $20,000.
• C) $0.
• D) $42,000.

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