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	$340,000	$114,800	$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
General Factory

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)	=	$	+	(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)	$

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	$	$		$	$
Allocate:
Human Resources
General Factory
Total after allocation	$	$		$	$

Reciprocal Method of Support Department Cost Allocation Valon Company has two support departments, Hairs and General Factory, and we producing departments, Fabricating and Assembly Support Departments Producing Departments Human General Resources Factory Fabricating Assembly Direct $140,000 $340,000 $114,800 504,000 Normal activity Number of employees 50 170 Square footage 1,000 5,700 13,300 The cost of the Human Resources Department are allocated on the basis of number of employees, and the cost of General Factory are allocated on the basis of square footage Now assume that Valon Company is the reciprocal method to allocate support departments Required: 1. Calculate the allocation rati (rounded to four significant digis) for the departments using the reciprocal method. If an ambitioner". Use the rounded values for student calculation Proportion of Driver Used by Human Resources General Factory Fabricating Assembly Human General Factory 2. Develop a simulan equation system of total cost for the support departments. If required, round your air to four decimal places. Use these number for begint calculation. If required, round all other intermediate calculations to six decimal places, except the answer computed in requirement 1. Human Resources (HR) ) (GF) General Factory (CF) (HR + + Salve for the total reciprocated costs of each support department. (Roard reciprocated total cost to the mari dollar) Humanos (HR) General Factory (6) 3. Using the reciprocal method, allocate the cost of the Human Resources and General Factory departments to the Fabricating and Assembly departments. Round allocated costs to the nearest dolar. If an amount is, et "0". Note: There may be a $1" difference due to intermediate rounding. Support Departments Human Resources General Factory Producing Departments Fabricating Assembly Human Resources General Factory Total al location