Valron Company has two support departments, Human Resources and General Factory,
ID: 2512094 • Letter: V
Question
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 ___$160,000___________ $350,000 ______ $114,200_______ $95,000
Normal activity:
Number of employees______ — _________ 60__________ 80____________ 170
Square footage ________1,000 _______ — __________ 5,700___________13,300
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. Valron Company uses the direct method of support department cost allocation.
Required:
1. Calculate the allocation ratios for the four departments using the direct method. If an amount is zero, enter "0". Round your answer to the nearest cent. Proportion of Driver Used by
__________________Human Resources___General Factory__ Fabricating______Assembly
Human Resources _______________ _____________ ___________ _________
General Factory ______________ _____________ ___________ __________
2. Using the direct 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". Support Departments Producing Departments
_________Human Resources____General Factory____Fabricating_____Assembly
Direct costs $_______ $ ___________ $______________ $ ___________
Allocate:
Human Resources $_________ $__________ $______________ $_____________
General Factory $_________ $__________ $_______________ $______________
Total after allocation $________ $_________ $_____________ $_______________
Explanation / Answer
Answer
Under direct method, services provided to another service department is considered for allocation base. Service department costs are directly allocated to non service department directly.
Human Resource
General factory
Fabricating
Assembly
Total
Human Resource
[number of employees]
80
170
250
Ratio
0%
0%
32%
68%
100%
General factory
[amount of square footage]
5700
13300
19000
Ratio
0%
0%
30%
70%
100%
Human Resource
General factory
Fabricating
Assembly
Total
Direct cost
160000
350000
114200
95000
719200
Allocate:
Human Resource
-160000
[160000 x 32%] 51200
[160000 x 68%] 108800
0
General Factory
-350000
[350000 x 30%] 105000
[350000 x 70%] 245000
0
Total after allocation
$0
$0
$270,400
$448,800
$719,200
Human Resource
General factory
Fabricating
Assembly
Total
Human Resource
[number of employees]
80
170
250
Ratio
0%
0%
32%
68%
100%
General factory
[amount of square footage]
5700
13300
19000
Ratio
0%
0%
30%
70%
100%
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