Valron Company has two support departments, Human Resources and General Factory,

Question

Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.

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.

Now assume that Valron Company uses the reciprocal method to allocate support department costs.

Required:

1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the reciprocal method. If an amount is zero, enter "0". Use the rounded values for subsequent calculations.

2. Develop a simultaneous equations system of total costs for the support departments. If required, round your answers to four decimal places. Use these numbers for subsequent calculations. If required, round all other intermediate calculations to six decimal places, except the answers computed in requirement 1.

Solve for the total reciprocated costs of each support department. (Round reciprocated total costs to the nearest dollar.)

3. Using the reciprocal method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. Round all allocated costs to the nearest dollar. If an amount is zero, enter "0". Note: There may be a "$1" difference due to intermediate rounding.

Support Departments Producing Departments Human
Resources General
Factory Fabricating Assembly Direct costs $160,000 $330,000 $114,200 $95,000 Normal activity: Number of employees — 60 80 170 Square footage 1,000 — 5,700 13,300

Explanation / Answer

1.

2. Simultaneous equation:

Human Resources (HR) = $160000 + 0.05 GF

General Factory (GF) = $330000 + 0.1935 HR

Reciprocated costs:

Human Resources (HR) = $160000 + 0.05 GF

HR = $160000 + [0.05 ($330000 + 0.1935 HR)]

HR = 160000 + (0.05 x 330000) + (0.05 x 0.1935 HR)

HR = 160000 + 16500 + 0.0097 HR

HR = 176500 + 0.0097 HR

HR - 0.0097 HR = 176500

0.9903 HR = 176500

HR = 176500/0.9903 = $178229

GF = 330000 + (0.1935 x 178229) = 330000 + 34487 = $364487

3.

Please note: There is a rounding off difference of $4.65.

Proportion of Driver Used by Human Resources General Factory Fabricating Assembly Human Resources - 0.1935 0.2581 0.5484 - (60/310) (80/310) (170/310) General Factory 0.05 - 0.285 0.665 (1000/20000) - (5700/20000) (13300/20000)

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.