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. Support Departments Operating Divisions Power General Factory Pottery Retail Overhead costs $140,400 $190,800 $96,000 $56,000 Machine hours 2,000 2,500 7,000 3,000 Square footage 2,500 1,700 4,000 6,000 Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar. Required: 3. Allocate the support service costs using the reciprocal method. Note: If an amount is zero, enter "0". Input to two decimal places. Allocation Ratios Power General Factory Pottery Retail Machine hours Square footage Cost Allocations Pottery Retail General Factory Power Direct costs Cost after allocation
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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
| Support Departments | Operating Divisions | ||||||
| Power | General Factory | Pottery | Retail | ||||
| $140,400 | $190,800 | $96,000 | $56,000 | ||||
| Machine hours | 2,000 | 2,500 | 7,000 | 3,000 | |||
| Square footage | 2,500 | 1,700 | 4,000 | 6,000 |
Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar.
Required:
3. Allocate the support service costs using the reciprocal method.
Note: If an amount is zero, enter "0". Input to two decimal places.
| Allocation Ratios | Power | General Factory | Pottery | Retail |
| Machine hours | ||||
| Square footage |
| Cost Allocations | Pottery | Retail |
| General Factory | ||
| Power | ||
| Direct costs | ||
| Cost after allocation |
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