Question

Long Island Manufacturing Company developed the following information for its service​ departments, S1 and​ S2, and its production​ departments, P1 and​ P2:       S1       S2       P1       P2 Overhead Cost ​$8,000 ​$14.400 ​$16,000 ​$20,000 Service Provided by S1 minusminusminus ​30% ​30% ​40% Service Provided by S2 ​25% minusminusminus ​30% ​45% Using the reciprocal method of service department cost​ allocation, how much is the total overhead cost for P1 for the period if calculations are rounded to the nearest​ dollar? A. ​$25,120 B. ​$25,210 C. ​$33,188 D. ​$25,188

Answer 1

Thus Option A is correct. ​$25,120

Step-by-step explanation:

S1 = 8000+0.25(14400+0.30(S1))

S1 = 8000+3600+0.075(S1)

S1 = $12,540 = $11,600 / 0.925

S2 = $18,162 = $14,400 + 0.30 ($12,540)

$25,210 = $16,000 + 0.30 ($12,540) + 0.30 ($18,162)