Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 $150,000 $160,000 $98,000 $56,000
Machine hours 2,000 1,000 6,900 3,100
Square footage 2,000 1,700 4,000 6,000

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

Required:

1. Allocate the support service costs using the direct method.

Allocation Ratios Pottery Retail
Proportion of machine hours
Proportion of square footage

Cost Allocations Pottery Retail
Power $ $
General Factory
Direct costs
$ $

2. Allocate the support service costs using the sequential method. The support departments are ranked in order of highest cost to lowest cost. If an amount is zero, enter "0".

Allocation Ratios Power General Factory Pottery Retail
Machine hours
Square footage

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

3. Allocate the support service costs using the reciprocal method. If an amount is zero, enter "0".

Allocation Ratios Power General Factory Pottery Retail
Machine hours
Square footage

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Practical Guide To Commercial And Industrial Energy Auditing

Authors: Mtijan M Kamara

1st Edition

1717257321, 978-1717257321

More Books

Students also viewed these Accounting questions