Chapter 7 BEX BEX.07.05

Sequential (Step) 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 General Factory Fabricating Assembly Resources $150,000 $ Direct costs $360,000 $120,900 $86,000 Normal activity 60 45 80 Number of employees 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 cast of General Factory are allocated on the basis of square footage. Now assume that Chekov Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential method. If an amount is zero, enter "O". Use the rounded values for subsequent calculations. Proportion of Driver Used by General Factory Fabricating Assembly Human Resources o Human Resources o 0.36 0.64 General Factory 0.0698 0 0.2791 7 0.6512 2. Using the sequential method, allocate the posts of the Human Resources and General Factory departments to the Fabricating and Assembly departments. If an amount is zero, enter"O". Round your answers to the nearest dollar. Support Departments Producing Departments Fabricating Assembly Human Resources General Factory Direct costs $150,000 $360,000 120,000 86,000 Allocate: General Factory 25,128 -360,000 X 100,476 234,432 Human Resources -175,128 o 63,046 112,082 Total after allocation 0 $ 0 x 284,422 432,514 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 "O". Note: There may be a "$ 1" difference due to intermediate rounding. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs 150,000 360,000 $ 120,900 86,000 Allocate: Human Resources -179,184 58,109 43,578 77,497 X General Factory 29,184 -418,109 116,694 272,231 x Total after allocation $ 0 $ 0 $ 281,172 $ 435,728 X