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In: Accounting

Sequential (Step) Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources...

Sequential (Step) Method of Support Department Cost Allocation

Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.

Support Departments Producing Departments
Human
Resources		 General
Factory		 Fabricating Assembly
Direct costs $175,000    $350,000    $114,900    $99,000   
Normal activity:
   Number of employees —    40    80    150   
   Square footage 1,400    —    5,900    13,000   


Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Now assume that Valron Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential method. If an amount is zero, enter "0". Use the rounded values for subsequent calculations.

Proportion of Driver Used by
Human Resources General Factory Fabricating Assembly
Human Resources
General Factory

2. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. If an amount is zero, enter"0". Round your answers to the nearest dollar.

Support Departments Producing Departments
Human Resources General Factory Fabricating Assembly
Direct costs $ $ $ $
Allocate:
  General Factory            
  Human Resources            
Total after allocation $ $ $ $

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement 1

Proportion of Driver Used by

Human Resources

General Factory

Fabricating

Assembly

Human Resources

0.3478 [80/(80+150)]

0.6522 [50/(80+150)]

General Factory

0.0690 [1400/(1400+5900+13000)]

0.2906 [5900/(1400+5900+13000)]

0.6404 [13000/(1400+5900+13000)]

  • Requirement 2

Support Departments

Producing Departments

Human Resources

General Factory

Fabricating

Assembly

Direct costs

$175,000

$350,000

$114,900

$99,000

Allocate:

  General Factory

$24,150

($350,000)

$101,710

$224,140

  Human Resources

($199,150)

$0

$69,264

$129,886

Total after allocation

$0

$0

$0

$285,874

$453,026

--Workings

Support Departments

Producing Departments

Human Resources

General Factory

Fabricating

Assembly

Direct costs

175000

350000

114900

99000

Allocate:

  General Factory

=350000*0.069

-350000

=350000*0.2906

=350000*0.6404

  Human Resources

=-175000-24150

0

=199150*0.3478

=199150*0.6522

ekkarill92 answered 7 months ago
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