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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.

	Support Departments		Producing Departments
	Human Resources	General Factory	Fabricating	Assembly
Direct costs	$160,000	$350,000	$114,200	$94,000
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 "0". Use the rounded values for subsequent calculations.

	Proportion of Driver Used by
	Human Resources	General Factory	Fabricating	Assembly
Human Resources	fill in the blank 1	fill in the blank 2	fill in the blank 3	fill in the blank 4
General Factory	fill in the blank 5	fill in the blank 6	fill in the blank 7	fill in the blank 8

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)	=	$fill in the blank 9	+	fill in the blank 10 (GF)
General Factory (GF)	=	$fill in the blank 11	+	fill in the blank 12 (HR)

Solve for the total reciprocated costs of each support department. (Round reciprocated total costs to the nearest dollar.)

Human Resources (HR)	$fill in the blank 13
General Factory (GF)	$fill in the blank 14

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 "0". Note: There may be a "$1" difference due to intermediate rounding.

	Support Departments			Producing Departments
	Human Resources	General Factory		Fabricating	Assembly
Direct costs	$fill in the blank 15	$fill in the blank 16		$fill in the blank 17	$fill in the blank 18
Allocate:
Human Resources	fill in the blank 19	fill in the blank 20		fill in the blank 21	fill in the blank 22
General Factory	fill in the blank 23	fill in the blank 24		fill in the blank 25	fill in the blank 26
Total after allocation	$fill in the blank 27	$fill in the blank 28		$fill in the blank 29	$fill in the blank 30