Valron Company has two support departments, Human Resources and General Factory,
ID: 2417673 • Letter: V
Question
Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.
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 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.
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 HumanResources General
Factory Fabricating Assembly Direct costs $180,000 $390,000 $114,800 $98,000 Normal activity: Number of employees — 40 70 160 Square footage 2,000 — 5,900 13,500
Explanation / Answer
We have 2 support departments : Human Resources and General Factory.
General Factory costs
To the Human Resources Department : 2000/21400 = 9.3458%
To the Fabricating Department: 5900/21400 = 27.5701%
To the Assembly Department : 13500/21400 = 63.0841%
Human Resources Department
Under the step down method, once a service department has allocated its costs, other departmental costs are not allocated to it. So, the General Factory Department will not accept any more costs. From the HR Department, we can allocate costs only to the producing departments. As given in the question, Human Resource costs are to be allocated on the basis of the number of employees
To the Fabricating Department : 70 / (70+160) = 70/230 = 30.4348%
To the Assembly Department : 160/ (160 + 70) = 160/230 = 69.5652%
We can tabulate the allocation ratios calculated above, as shown hereunder:
Now, based on the calculated ratios, we will allocate the costs to the various departments.
General Factory Costs
To the Human Resources Department: $(390,000 * 9.3458/100) = $ 36448.62
To the Fabricating Department: $(390000 * 27.5701/100) = $ 107523.39
To the Assembly Department = $(390000 * 63.0841/100) = $ 246027.99
Human Resources Costs
Total Human Resources costs to be allocated = Direct costs of the Human resources department + Costs allocated from the General Factory Department = $(180000+36448.62) = $216448.62
To the Fabricating Department : $(216448.62 * 30.4348/100) = $ 65875.7
To the Assembly Department: $(216448.62 * 69.5652/100) = $ 150572.9
The allocation of costs can be tabulated as under :
Human Resources General Factory Fabricating Assembly Human Resources 30.4348% 69.5652% Ganeral factory 9.3458% 27.5701% 63.0841%Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.