Question

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 ___$160,000___________    $350,000 ______    $114,200_______ $95,000

Normal activity:

Number of employees______ — _________ 60__________    80____________    170

Square footage    ________1,000 _______    — __________ 5,700___________13,300

The costs of the Human 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. Valron Company uses the direct method of support department cost allocation.

Required:

1. Calculate the allocation ratios for the four departments using the direct method. If an amount is zero, enter "0". Round your answer to the nearest cent. Proportion of Driver Used by   

__________________Human Resources___General Factory__ Fabricating______Assembly

Human Resources _______________    _____________    ___________    _________

General Factory    ______________ _____________    ___________    __________

2. Using the direct 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". Support Departments    Producing Departments

_________Human Resources____General Factory____Fabricating_____Assembly

Direct costs $_______    $ ___________ $______________ $ ___________

Allocate:

Human Resources $_________    $__________ $______________    $_____________

General Factory    $_________ $__________ $_______________    $______________

Total after allocation $________    $_________ $_____________    $_______________

Answer 1

• All working forms part of the answer
• Calculation of Allocation Ratios

Under direct method, services provided to another service department is considered for allocation base. Service department costs are directly allocated to non service department directly.

	Human Resource	General factory	Fabricating	Assembly	Total
Human Resource	[number of employees]		80	170	250
Ratio	0%	0%	32%	68%	100%
General factory	[amount of square footage]		5700	13300	19000
Ratio	0%	0%	30%	70%	100%

• Allocation of cost

	Human Resource	General factory	Fabricating	Assembly	Total
Direct cost	160000	350000	114200	95000	719200
Allocate:
Human Resource	-160000		[160000 x 32%] 51200	[160000 x 68%] 108800	0
General Factory		-350000	[350000 x 30%] 105000	[350000 x 70%] 245000	0
Total after allocation	$0	$0	$270,400	$448,800	$719,200