Question

Sanjay Company manufactures a product in a factory that has two producing departments, Assembly and Painting, and two support departments, S1 and S2. The activity driver for S1 is square footage, and the activity driver for S2 is number of machine hours. The following data pertain to Sanjay: Support Departments Producing Departments S1 S2 Assembly Painting Direct costs $200,000 $140,000 $115,000 $96,000 Normal activity: Square footage — 500 1,875 625 Machine hours 337 — 3,200 12,800

Required:

1. Calculate the cost assignment ratios to be used under the direct method for Departments S1 and S2. (Note: Each support department will have two ratios—one for Assembly and the other for Painting.) Round your answers to two decimal places.

	Assembly	Painting
S1
S2

2. Allocate the support department costs to the producing departments by using the direct method. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enter zero ("0").

Support Departments

Producing Departments

Allocate:

S1

S2

Assembly

Painting

Direct costs

$

$

$

$

S1
S2
Total	$		$		$		$

Answer 1

1) Allocation ratio

Allocation ratio	Assembly	Painting
S1	1875/2500 = 75%	625/2500 = 25%
S2	3200/16000 = 20%	12800/16000 = 80%

2. Allocate the support department costs to the producing departments by using the direct method. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enter zero ("0").

	Support departments		Producing departments
	S1	S2	Assembly	Painting
Direct Cost	200000	140000	115000	96000
S1	-200000		150000	50000
S2		-140000	28000	112000
Total			293000	258000