5.5

Support department cost allocationcomparison

Becker Tabletops has two support departments ( Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows:

Support Department		Cost Driver
Janitorial Department		Square footage to be serviced
Cafeteria Department		Number of employees

	Janitorial Department	Cafeteria Department	Cutting Department	Assembly Department
Department costs	$310,000	$169,000	$1,504,000	$680,000
Square feet	50	5,000	1,000	4,000
Number of employees	10	3	30	10

Allocated the support department costs to the production departments using the direct method below.

	Cutting Department		Assembly Department
Janitorial Department cost allocation	$62,000		$248,000
Cafeteria Department cost allocation	$126,750		$42,250

Allocated the support department costs to the production departments using the reciprocal services method below.

	Cutting Department		Assembly Department
Janitorial Department cost allocation	$38,200		$152,800
Cafeteria Department cost allocation	$216,000		$72,000

Allocated the support department costs to the production departments and Cafeteria Department using the sequential method below.

	Cafeteria Department		Cutting Department		Assembly Department
Janitorial Department cost allocation	$155,000		$31,000		$124,000
Cafeteria Department cost allocation			$243,000		$81,000

Compare the total support department costs allocated to each production department under each cost allocation method.

a. Which production department is allocated the most support department costs under the direct method?

		Cost
Assembly Department		?

b. Which production department is allocated the most support department costs under the sequential method?

		Cost
Cutting Department		?

c. Which production department is allocated the most support department costs under the reciprocal services method?

		Cost
Cutting Department		?