Answer:
E. Both S1's cost should be allocated (i.e., spread) over 140 employees and S2 should allocate a total of $390,000 to P1 and P2.
Explanation:
As S1 gives more service, So it would be allocated first
Here
S1 cost of $280,000 would be allocated to S2 P1 and P2 based on number  of employees
The total employees in S2 P1 and P2 is 
= 20 + 50 + 70 
= 140
And, the Cost to be allocated per employee is 
= $280,000 ÷ 140 
= $2,000
Now cost received by S2 is 
= $2,000 × 20 
= $40000
And, the cost received by P1 is 
= $2,000 × 50 
= $100,000
And, the cost received by P2 is 
= $2,000 × $70 
= $140,000
Now 
S2 contains total cost of 
= $350,000 + $40,000 (from S1) 
= $390,000
So this would be allocated to P1 and P2 as S1 has already allocated  
Hence, option D is correct