Reciprocal Method of Support Department Cost Allocation Vatron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Direct costs Normal activity: Required: Support Departments Producing Departments Human General Resources Factory Fabricating Assembly $160,000 $350,000 $114,800 Number of employees 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 footagen Now assume that Vairon Company uses the reciprocal method to allocate support department costs. Human Resources General Factory Human Resources 60 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 valuem for subsequent calculations. 0.05 $95,000 80 General Factory Proportion of Driver Used by Fabricating ox O✓ 0.2667 X 0.285 ✔ Assembly 0.5667 X 0.665

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Chapter1: Financial Statements And Business Decisions
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Human Resources
General Factory
Human Resources
(HR)
General Factory (GF)
Direct costs
Allocate:
Human Resources
Human Resources
OV
General Factory
0.05
Total after allocation
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.
17,000 X (GF)
160,000✔
Proportion of Driver Used by
Fabricating
General Factory
0
350,000 V
(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)
-160,000 X
OX
ox
0✔
0X
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
160,000✔
350,000✔
0X
0.2667 X
0.285 ✔
-340,000 X
0X
Assembly
Fabricating
0.5667 X
0.665 ✔
114,800 ✓
30,618 X
32,718 X
183,933 X
Assembly
95,000 ✓
53,837 X
63,175 X
222,775
Transcribed Image Text:Human Resources General Factory Human Resources (HR) General Factory (GF) Direct costs Allocate: Human Resources Human Resources OV General Factory 0.05 Total after allocation 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. 17,000 X (GF) 160,000✔ Proportion of Driver Used by Fabricating General Factory 0 350,000 V (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) -160,000 X OX ox 0✔ 0X 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 160,000✔ 350,000✔ 0X 0.2667 X 0.285 ✔ -340,000 X 0X Assembly Fabricating 0.5667 X 0.665 ✔ 114,800 ✓ 30,618 X 32,718 X 183,933 X Assembly 95,000 ✓ 53,837 X 63,175 X 222,775
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.
Direct costs
Normal activity:
Required:
Support Departments Producing Departments
Human General
Resources Factory Fabricating Assembly
$160,000 $350,000
$95,000
Number of employees
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 Vairon Company uses the reciprocal method to allocate support department costs.
Human Resources
General Factory
$114,800
60
Human Resources
o✓
0.05 ✔
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.
80
General Factory
170
Proportion of Driver Used by
Fabricating
ox
0✔
0.2667
0.285
Assembly
0.5667 X
0.665✓
Transcribed Image Text: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. Direct costs Normal activity: Required: Support Departments Producing Departments Human General Resources Factory Fabricating Assembly $160,000 $350,000 $95,000 Number of employees 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 Vairon Company uses the reciprocal method to allocate support department costs. Human Resources General Factory $114,800 60 Human Resources o✓ 0.05 ✔ 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. 80 General Factory 170 Proportion of Driver Used by Fabricating ox 0✔ 0.2667 0.285 Assembly 0.5667 X 0.665✓
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