Exercise 6-8 Cost Allocation Process Marvin Company has three service departments (S1, S2, and S3) and two production departments (P1 and P2). The following data relate to Marvin's allocation of service department costs: Budgeted Number of Costs Employees S1 $4,500,000 90 S2 3,000,000 60 S3 2,700,000 40 P1 200 P2 300 Service department costs are allocated by the direct method. The number of employees is used as the allocation base for all service department costs. What-if? Consider the following after you have completed the requirements of E6-8. The manager of department P2 thinks he is being charged more than his 'fair share' of service department costs from department S2. He argues that department S2 costs have been less than budget by $80,000 for each of the past few months. He requests that the allocation be based on actual instead of budgeted costs. 1. Determine the costs to be allocated to department P2 from department S2 if actual costs are allocated rather than budgeted costs. Allocated Cost Allocated to Costs P1 P2 Allocated of budgeted costs Allocation of actual costs 2. Which allocation basis appears to be more 'fair' to the departments receiving the allocations