Question

Vines Company is a manufacturer of women’s and men’s swimsuits. The company uses a dual-rate system to allocate support costs. Last year’s support departments’ fixed and variable costs are as follows.


Allocation base amounts for all of the departments are:


REQUIRED
A. Use the following allocation bases for fixed support costs: direct costs for accounting, number of employees for human resources, and square feet for janitorial.
1. Allocate fixed support costs using the direct method.
2. Allocate fixed support costs using the step-down method.
3. Allocate fixed support costs using the reciprocal method.
B. Use the following allocation bases for variable support costs: time spent for accounting, number of employees for human resources, and time spent for janitorial.
1. Allocate variable support costs using the direct method.
2. Allocate variable support costs using the step-down method.
3. Allocate variable support costs using the reciprocal method.
C. Suppose support costs were not broken down into fixed and variable cost pools. What allocation base would you use to allocate the costs for each support department? Explain.
D. Describe several possible reasons why the managers of Vines Company allocate support costs to operating departments.
E. Discuss whether a dual-rate support cost allocation system is likely to be better for Vines Company than a single-ratesystem.


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  • CreatedJanuary 26, 2015
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