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		$181,200		$98,000		$58,000
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:

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

Note: Input to two decimal places.

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. 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 Power General Factory Pottery Retail Direct costs $ $ General Factory II II Power Cost after allocation $ 3. Allocate the support service costs using the reciprocal method. Note: If an amount is zero, enter "O". 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