Diablo, Inc., has two production departments (P1 and P2) and three service departments (S1, S2, and S3). Service department costs are allocated to production departments using the direct method. The $400,000 costs of department S1 are allocated based on the number of employees in each production department. The $600,000 costs of department S2 are allocated based on the square footage of space occupied by each production department. The $300,000 costs of department S3 are allocated based on hours of computer support used by each production department. Information for each production department follows.

Required:

a. Calculate the service department costs allocated to each production department.

b. In general, do U.S. Generally Accepted Accounting Principles (U.S. GAAP) allow for the allocation of service department costs to production departments for the purpose of valuing inventory?

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Number of Employees Production Square Feet Computer Support Hours Department Occupied 30,000 70,000 100,000 P1 3,000 40 160 200 P2 Total 12,000