1. **Problem Statement for Question 3:** Determine the total cost of P1 and P2 using the direct method given the overhead cost allocation percentages and direct costs. 2. **Given Data:** - Overhead costs: S1 = 180000, S2 = 60000, P1 = 50000, P2 = 120000 - Allocation percentages (From S1 to P1 = 20%, S1 to P2 = unknown, S2 to P1 = unknown, S2 to P2 = 30%) - From S1 to S2 = 10%, From S2 to S1 = 10% 3. **Direct Method Explanation:** The direct method allocates service department costs only to producing departments, ignoring inter-service department allocations. 4. **Calculate allocations from S1:** - Total allocation from S1 to producing departments = 20% (P1) + ? (P2) - Since S1 allocates 10% to S2, the rest to producing departments is 100% - 10% = 90% - Therefore, allocation to P2 from S1 = 90% - 20% = 70% 5. **Calculate allocations from S2:** - Total allocation from S2 to producing departments = ? (P1) + 30% (P2) - Since S2 allocates 10% to S1, the rest to producing departments is 100% - 10% = 90% - Therefore, allocation to P1 from S2 = 90% - 30% = 60% 6. **Calculate allocated costs:** - From S1: - To P1: $180000 \times 0.20 = 36000$ - To P2: $180000 \times 0.70 = 126000$ - From S2: - To P1: $60000 \times 0.60 = 36000$ - To P2: $60000 \times 0.30 = 18000$ 7. **Calculate total costs for P1 and P2:** - P1 total cost = direct cost + allocations = $50000 + 36000 + 36000 = 122000$ - P2 total cost = direct cost + allocations = $120000 + 126000 + 18000 = 264000$ --- 8. **Problem Statement for Question 4:** Determine the amount of maintenance and utilities department costs distributed to producing departments A and B using the direct method. 9. **Given Data:** - Overhead costs: Maintenance = 115000, Utilities = 65000 - Service provided to departments (percentages): - Maintenance to Utilities = 15% - Utilities to Maintenance = 25% - Maintenance to Producing A = 25% - Maintenance to Producing B = 50% - Utilities to Producing A = 40% - Utilities to Producing B = 45% 10. **Direct Method Explanation:** Ignore service department to service department allocations and allocate only to producing departments. 11. **Calculate allocations:** - Maintenance to A: $115000 \times 0.25 = 28750$ - Maintenance to B: $115000 \times 0.50 = 57500$ - Utilities to A: $65000 \times 0.40 = 26000$ - Utilities to B: $65000 \times 0.45 = 29250$ 12. **Final distributed costs:** - Producing A receives $28750 + 26000 = 54750$ - Producing B receives $57500 + 29250 = 86750$