Question

1. Bradford Company has two service departments, Human Resources and Janitorial, and two production departments, Cutting and Glazing. The following data have been estimated for next year’s operations:

Department:	Direct Charges	Number of Employees	Square Footage
Human Resources	$360,000	6	15,000
Janitorial	$280,000	8	20,000
Cutting	$428,000	42	25,000
Glazing	$562,000	40	35,000

Requirements:

(1)   Distribute the service department costs using the sequential distribution method. Distribute the Human Resources Department first. (24 points/3 points each)

(2) Prepare the journal entries to distribute the costs of the service departments to the production departments given the results of your calculations. (16 points/8 points each)

ANS:

(1)      Sequential Distribution Method:

	Human Resources	Janitorial	Cutting	Glazing	Total
Total direct charges	$360,000	$280,000	$428,000	$562,000	$1,630,000
HR distribution (number of employees) Janitorial           Cutting          Glazing
Janitorial distribution (sq. ft.)    Cutting          Glazing
Total

(2)

Answer 1

Part 1

Step method
Distribute the Human Resources Department first
Department	Human Resources	Janitorial	Cutting	Glazing
Direct overhead	$          360,000	$          280,000	$          428,000	$          562,000
Allocated Human Resources In Proportion of 8 : 42 : 40 respectively (8+42+40=90) (For Cutting = 360000*42/90)	$       (360,000)	$            32,000	$          168,000	$          160,000
Total	$                     -	$          312,000	$          596,000	$          722,000
Allocated Janitorial In Proportion of 25000 : 35000 respectively (280000+32000=312000) (For Cutting = 312000*25000/60000)		$       (312,000)	$          130,000	$          182,000
Total cost after departmental allocation using Step method	$                     -	$                     -	$          726,000	$          904,000

As per your format

Step method
Distribute the Human Resources Department first
Department	Human Resources	Janitorial	Cutting	Glazing
Total direct charges	$          360,000	$          280,000	$          428,000	$          562,000
HR distribution (number of employees)	$       (360,000)
Janitorial (360000*8/90)		$            32,000
Cutting (360000*42/90)			$          168,000
Glazing (360000*40/90)				$          160,000
Janitorial distribution (sq. ft.)		$       (312,000)
Cutting (312000*25000/60000)			$          130,000
Glazing (312000*35000/60000)				$          182,000
Total	$                     -	$                     -	$          726,000	$          904,000

Part 2

Journal entries
Event	General Journal	Debit	Credit
1	Factory overhead - Janitorial Department	$            32,000
	Factory overhead - Cutting Department	$          168,000
	Factory overhead - Glazing Department	$          160,000
	Factory overhead - Human Resources Department		$          360,000
	To record distribute the costs of the human resources departments.
2	Factory overhead - Cutting Department	$          130,000
	Factory overhead - Glazing Department	$          182,000
	Factory overhead - Janitorial Department		$          312,000
	To record distribute the costs of the janitorial departments.