Refer to Cornerstone Exercise 5-6 for data. Now assume that the Pineapple Pen Company uses the sequential

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Refer to Cornerstone Exercise 5-6 for data. Now assume that the Pineapple Pen Company uses the sequential method to allocate support department costs to the producing departments. Maintenance is allocated first in the sequential method for the company.

Operating Divisions Support Departments Cafeteria Pens Maintenance Pencils Overhead costs Number of employees Square met

Required:
1. Calculate the allocation ratios for the cafeteria and the maintenance departments (Carry these calculations out to four significant digits.)
2. Allocate the support service costs to the producing departments.
3. Assume departmental overhead rates are based on direct labour hours. Calculate the overhead rate for the pen division and for the pencil division (round overhead rates to the nearest cent).
4. What is the difference between the direct method and the sequential method of allocating support centre costs? Which is better?

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Cornerstones of Managerial Accounting

ISBN: 978-0176530884

2nd Canadian edition

Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman

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