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Homework answers / question archive / Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly

Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly

Accounting

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 $150,000 $330,000 $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 $ $   $ $

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