Pottery Inc., is divided into 2 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 number of machine hours and general factory costs on the basis of square footage. Allocations for the coming year are based on the following date?

Direct Cost $150,000 $160,000 $98,000 $56,000

Machine Hours 1000 6900 3100

Square Footage 2000 4000 6000

1. Calculate the allocation ratios for the department using the direct method in the table provided below.

Power Department General Factory Department Pottery Retail

Power Department

General Factory Department

2. Using the direct method, allocate the cost of the Power Department and General Factory Department to the Pottery and Retail departments in the table provided below.

Power Department General Factory Department Pottery Retail

Direct Costs $150,000 $160,000 $98,000 $56,000

Allocate:

Power Department

General Factory Department

Total after Allocation

3. Determine the support department to allocate first, by ranking the support departments in order of the percentage of service provided to the other support department.
4. Develop a table with the allocation ratios for the departments using the sequential (step) method showing the support department first that provided the greater service to the other support department.
5. Using the sequential method, allocate the costs of the power department and general factory department to the pottery and retail departments in the table provided below.

Power Department General Factory Department Pottery Retail

Direct Costs $150,000 $160,000 $98,000 $56,000

Allocate:

Total After Allocation