Hi, Can anyone help me with the Step Method of allocating costs from 3 support departments to 2 producing departments? I am stuck on problem 7.21 from Cornerstones of Cost Accounting.

Thank you,

Eustacia

The question uses the data from this problem to solve using the step method:

Exercise 7.20 Direct Method and Overhead Rates Objective 3 Jasmine Company manufactures both pesticide and liquid fertilizer, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows: + Support Departments General Factory $314,000 Producing Departments Pesticide Liquid Fertilizer Power $90,000 1,500 Purchasing Overhead Square feet Machine hours Purchase orders $167.000 1,500 1,345 $78,900 4,200 24,000 120 $107,800 4,800 8,000 60 1,403 40 The company does not break overhead into fixed and variable components. The bases for allocation are power-machine hours; general factory-square feet; and purchasing- purchase orders. Required: 1. Allocate the overhead costs to the producing departments using the direct method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.) Answer + Exercise 7.21 Sequential Method Objective 3 Refer to the data in Exercise 7.20. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)