Reciprocal Method of Support Department Cost Allocation Chekov Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Direct costs Normal activity: Human Resources General Factory Human Resources (HR) General Factory (GF) Number of employees Square footage 6,000 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 Chekov Company uses the reciprocal method to allocate support department costs. Direct costs Allocate: Support Departments Human Resources $150,000 Human Resources General Factory M Total after allocation 1,500 General Factory 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 calculation: Proportion of Driver Used by Human Resources $340,000 $ Producing Departments 60 Fabricating Assembly $114,800 $95,000 + 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) (HR) General Factory (GF) Solve for the total reciprocated costs of each support department. (Round reciprocated total costs to the nearest dollar.) 45 General Factory 80 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 Human Resources General Factory 14,000 $ Fabricating Assembly Fabricating Producing Departments Assembly
Reciprocal Method of Support Department Cost Allocation Chekov Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Direct costs Normal activity: Human Resources General Factory Human Resources (HR) General Factory (GF) Number of employees Square footage 6,000 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 Chekov Company uses the reciprocal method to allocate support department costs. Direct costs Allocate: Support Departments Human Resources $150,000 Human Resources General Factory M Total after allocation 1,500 General Factory 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 calculation: Proportion of Driver Used by Human Resources $340,000 $ Producing Departments 60 Fabricating Assembly $114,800 $95,000 + 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) (HR) General Factory (GF) Solve for the total reciprocated costs of each support department. (Round reciprocated total costs to the nearest dollar.) 45 General Factory 80 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 Human Resources General Factory 14,000 $ Fabricating Assembly Fabricating Producing Departments Assembly
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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