Sequential Method of Support Department Cost Allocation Stevenson Company is div

Question

Sequential Method of Support Department Cost Allocation

Stevenson Company is divided into two operating divisions: Battery and Small Motors. Assume that Stevenson uses the sequential method to allocate support department costs to the operating divisions. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. General Factory is allocated first in the sequential method for the company. Support department cost allocations are based on the following data:

Support Departments Operating Divisions
Power General Factory
Battery Small Motors Overhead costs $160,000 $430,000 $163,000 $84,600 Machine hours 2,000 2,000 8,000 2,000 Square footage 1,000 1,500 5,000 17,500 Direct labor hours 18,000 60,000

Explanation / Answer

Power General factory Battery Small Motors Overhead Cost $160,000 430000 163000 84600 General factory allocated in the ratio of 1:5:15 20476 102381 307143 Total $180,476 Power will be allocated to Battery and small motors in the ratio of 8000:1500 $151,980 $28,496 Total 417361 420239

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