Question

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 $370,000 $114,800 $97,000 Normal activity: Number of employees — 40 70 150 Square footage 1,300 — 5,700 13,900 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 $ $ $ $

Answer 1

• [1]

	Proportion of Driver Used by
	Human Resources	General Factory	Fabricating	Assembly
Human Resources			0.3182 [70/(70+150)]	0.6818 [150/(70+150)]
General Factory	0.0622 [1300/(1300 + 5700 + 13900)]		0.2727 [5700/(1300 + 5700 + 13900)]	0.6651 [13900/(1300 + 5700 + 13900)]

• [2]

	Support Departments			Producing Departments
	Human Resources	General Factory		Fabricating	Assembly
Direct costs	$175,000	$370,000		$114,800	$97,000
Allocate:
General Factory	$23,014	($370,000)		$100,899	$246,087
Human Resources	($198,014)	$0		$63,008	$135,006
Total after allocation	$0	$0	$0	$278,707	$478,093

--Working

	Support Departments			Producing Departments
	Human Resources	General Factory		Fabricating	Assembly
Direct costs	175000	370000		114800	97000
Allocate:
General Factory	=370000*0.0622	-370000		=370000*0.2727	=370000*0.6651
Human Resources	=-175000-23014	0		=198014*0.3182	=198014*0.6818