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 $$140,000$ $$350,000$ $$114,800$ $$95,000$

Normal activity:

Number of employees $6080170$

Square footage $1,0005,70013,300$

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.

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

General Factory

except the answers computed in requirement $1.$

Human Resources $($HR$)=$

$+$

$($GF$)$

General Factory $($GF$),=$$

$+$

$($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$)$

difference due to intermediate rounding.

Support Departments

Direct costs

Allocate:

Human Resources

General Factory

Total after allocation