Question

Sequential (Step) Method of Support Department Cost Allocation

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	$180,000	$310,000		$114,400	$99,000
Normal activity:
Number of employees	—	40		70	150
Square footage	1,800	—		5,000	13,500

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 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 "0". Use the rounded values for subsequent calculations.

	Proportion of Driver Used by
	Human Resources	General Factory	Fabricating	Assembly
Human Resources
General Factory

2. Using the sequential 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". Round your answers to the nearest dollar.

	Support Departments			Producing Departments
	Human Resources	General Factory		Fabricating	Assembly
Direct costs	$	$		$	$
Allocate:
General Factory
Human Resources
Total after allocation	$	$		$	$

Answer 1

Solution 1:

Proportion of Driver Used by
	Human Resources	General Factory	Fabricating	Assembly
Human Resources	0	0	0.3182	0.6818
General Factory	0.0887	0	0.2463	0.6650

solution 2:

Particulars	Support Departments		Producing Departments
	Human Resources	General Factory	Fabricating	Assembly
Direct costs	$180,000	$310,000	$114,400	$99,000
Allocate:
General Factory	$27,488	-$310,000	$76,355	$206,158
Human Resources	-$207,488		$66,018.91	$141,469
Total after allocation	$0	$0	$256,774	$446,627