alter port departments Haida Pottery Inc. is divided into two operating division

Question

alter port departments Haida Pottery Inc. is divided into two operating divisions: Pottery n pany allocates Power and Human Resources department costs to sion. Power costs are allocated on the basis of the number of machine resources costs on the basis of the number of employees. No effo fixed and variable costs; however, only budgeted costs are allocated OBJECTIVE 3 Problem and Retail. The Problem 7-30 COMPARISON OF METHODS OF ALL to each the ntoyees. ilocated. Allocations for s is made to Allto coming year are based on the following data: Operating Divisions Support Departments Human Resources Pottery Rea Power $150,000 2,000 20 $160,000 1,000 17 $83,600 $47 800 3,600 5,400 Overhead costs Machine hours 60 Number of employees 80 Round all allocation ratios to four significant digits. Round all al nearest dollar. allocated amounts to the Kaund al alocartion ratios to four significant digits. Round all alt Required Allocate the support service costs using the direct method. 2. Allocate the support service costs using the sequential method. The support d epan ments are ranked in order ofhighest cost to lowest cost. Allocate the support service costs using the reciprocal method. 3.

Explanation / Answer

3. Allocation of Support Service Costs using the Reciprocal Method :

Support Departments Operating Divisions Power Human Resources Pottery Retail Overhead Costs $ 150,000 $ 160,000 $ 83,600 47,800 Allocation of Power Overheads ( 1000: 3,600 : 5,400) ( 150,000) 15,000 54,000 81,000 0 175,000 Allocation of Human Resources Overheads ( 20 : 60 : 80) 21,875 (175,000) 65,625 87,500 21,875 0 Allocation of Power Overhead ( 1000 : 3,600 : 5,400) ( 21,875) 2,187.50 7,875 11,812.50 0 2,187.50 Allocation of Human Resources Overhead ( 20: 60: 80) 273.44 (2,187.50) 820.31 1,093.75 273.44 0 Allocation of Power Overhead ( 1,000 : 3,600 : 5,400) (273.44) 27.34 98.44 147.66 0 27.34 Allocation of Human Resources Overhead ( 20 : 60: 80) 3.42 (27.34) 10.25 13.67 3.42 0 Allocation of Power Overhead (3.42) 0 1.37 2.05 Totals 0 0 212,030.37 229,369.63

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