Comparison of Methods of Allocation Duweynie Pottery, Inc., is divided into two 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 the number of machine hours and general factory costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations. Overhead costs Retail $58,000 3,000 Square footage 6,000 Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar. Machine hours Cost Allocations Support Departments Allocation Ratios Proportion of machine hours Proportion of square footage Power Power General Factory Direct costs $150,000 2,000 2,500 Required: 1. Allocate the support service costs using the direct method. Note: Input to two decimal places. General Factory Pottery $ 105,000 68,640 171,600 245 240 $171,600 2,500 Pottery 1,700 0.7 0.4 Retail 45,000 102,960 98,000 245 050 Retail 0.3 Operating Divisions 0.6 Pottery $98,000 7,000 4,000
Comparison of Methods of Allocation Duweynie Pottery, Inc., is divided into two 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 the number of machine hours and general factory costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations. Overhead costs Retail $58,000 3,000 Square footage 6,000 Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar. Machine hours Cost Allocations Support Departments Allocation Ratios Proportion of machine hours Proportion of square footage Power Power General Factory Direct costs $150,000 2,000 2,500 Required: 1. Allocate the support service costs using the direct method. Note: Input to two decimal places. General Factory Pottery $ 105,000 68,640 171,600 245 240 $171,600 2,500 Pottery 1,700 0.7 0.4 Retail 45,000 102,960 98,000 245 050 Retail 0.3 Operating Divisions 0.6 Pottery $98,000 7,000 4,000
Chapter1: Financial Statements And Business Decisions
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