Assignment 12, Due 04/10/22 @ 11:55 p.m. EST (Eastern Standard Time

1. BEX.07.01.ALGO
2. BEX.07.03.ALGO
3. BEX.07.04.ALGO
4. BEX.07.05.ALGO

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   Reciprocal Method of Support Department Cost Allocation

   Chekov 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	$170,000	$330,000	$114,200	$95,000
   Normal activity:
   Number of employees		60	45	80
   Square footage	1,500		6,000	14,000

   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 Chekov 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.

   	Proportion of Driver Used by
   	Human Resources	General Factory	Fabricating	Assembly
   Human Resources	0	0.3243	0.2432	0.4324
   General Factory	0.0698	0	0.2791	0.6512

   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.

   Human Resources (HR)	=	170000	+	? (GF)
   General Factory (GF)	=	330000	+	? (HR)

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

   Human Resources (HR)	?
   General Factory (GF)	?

   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	170,000	330,000		114,200	95,000
   Allocate:
   Human Resources	?	?		?	?
   General Factory	?	?		?	?
   Total after allocation	0	?		?	?

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   1. The reciprocal method, as well as direct and sequential methods, allocates all support department costs to the producing departments.

   2. The reciprocal method takes full account of support department reciprocity. After allocation, zero cost remains in the support departments. Pre-allocation total overhead must equal post-allocation overhead.

   3. With the reciprocal method, the usage of one support department by another is used to determine the total cost of each support department, where the total cost reflects interactions among the support departments. Then, the new total of support department costs is allocated to the producing departments. This method fully accounts for support department interaction.

   See Example 7.5.

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