Comparison of Methods of Allocation Duweynie Pottery, Inc., is divided into two operating divisions: Pottery and Retail. The company allocates Power and General Factory department costs to each operating division. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations. Support Departments Operating Divisions Power General Factory Pottery Retail Overhead costs $159,600 $181,200 $97,000 $55,000 Machine hours 2,000 2,500 7,000 3,000 Square footage 2,500 1,700 4,000 6,000 Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar. Required: 3. Allocate the support service costs using the reciprocal method. Note: If an amount is zero, enter "0". Input to two decimal places. Allocation Ratios Power General Factory Pottery Retail Machine hours Square footage Cost Allocations Pottery Retail General Factory Power Direct costs Cost after allocation

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 21E: Refer to the data in Exercise 7.20. The company has decided to use the sequential method of...

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Comparison of Methods of Allocation

Duweynie Pottery, Inc., is divided into two operating divisions: Pottery and Retail. The company allocates Power and General Factory department costs to each operating division. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations.

	Support Departments	Operating Divisions
	Power	General Factory	Pottery	Retail
Overhead costs	$159,600	$181,200	$97,000	$55,000
Machine hours	2,000	2,500	7,000	3,000
Square footage	2,500	1,700	4,000	6,000

Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar.

Required:

3. Allocate the support service costs using the reciprocal method.

Note: If an amount is zero, enter "0". Input to two decimal places.

Allocation Ratios	Power	General Factory	Pottery	Retail
Machine hours
Square footage

Cost Allocations	Pottery	Retail
General Factory
Power
Direct costs
Cost after allocation

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