mapter 7 Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly Producing Departments Support Departments Human General Resources Factory $170,000 $360,000 Fabricating $114,200 Assembly $95,000 Direct costs Normal activity: Number of employees 60 80 170 Square footage 1,000 5,700 13,300 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Now assume that Valron Company uses the reciprocal method to allocate support department costs. Required: 1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the reciprocal method. If an amount is zero, enter "O". Use the rounded values for subsequent calculations. Proportion of Driver Used by Human Resources General Factory Fabricating Assembly Human Resources 0 0.1935 0.2581 . 0.5484 General Factory 0.0500 0 0.2850 0.6650 2. Develop a simultaneous equations system of total costs for the support departments. If required, round your answers to four decimal places. Use these numbers for subsequent calculations. If required, round all other intermediate calculations to six decimal places, except the answers computed in requirement 1. Human Resources (HR) - $ 170,000 = 0.05 (GF) General Factory (GF) - S 360,000 + 0.1935 (HR) Solve for the total reciprocated costs of each support department. (Round reciprocated total costs to the nearest dollar.) Human Resources (HR) General Factory (GF) 3. Using the reciprocal method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Previous Next an Square footage 1,000 5,700 13,300 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Now assume that Valron Company uses the reciprocal method to allocate support department costs. Required: 1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the reciprocal method. If an amount is zero, enter "O". Use the rounded values for subsequent calculations. Human Resources Proportion of Driver Used by General Factory Fabricating 0.1935 0.2581 Assembly Human Resources 0.5484 General Factory 0.0500 0.2850 0.6650 2. Develop a simultaneous equations system of total costs for the support departments. If required, round your answers to four decimal places. Use these numbers for subsequent calculations. If required, round all other intermediate calculations to six decimal places, except the answers computed in requirement 1. Human Resources (HR) = $ 170,000 0.05 (GF) General Factory (GF) = $ 360,000 0.1935 (HR) Solve for the total reciprocated costs of each support department (Round reciprocated total costs to the nearest dollar.) Human Resources (HR) General Factory (GF) 3. Using the reciprocal method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. Round all allocated costs to the nearest dollar. If an amount is zero, enter "O". Note: There may be a $10 difference due to intermediate rounding. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs Allocate Human Resources General Factory Total after allocation Previous Next