Sequential (Step) Method of Support Department Cost Allocation Chekov 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 $165,000 $380,000 $114,200 $90,000 Normal activity: Number of employees — 40 70 150 Square footage 1,800 — 5,500 13,200 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 sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential 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. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. If an amount is zero, enter"0". Round your answers to the nearest dollar. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs Allocate: General Factory Human Resources Total after allocation

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Sequential (Step) Method of Support Department Cost Allocation

Chekov 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	$165,000	$380,000		$114,200	$90,000
Normal activity:
Number of employees	—	40		70	150
Square footage	1,800	—		5,500	13,200

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 sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential 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. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. If an amount is zero, enter"0". Round your answers to the nearest dollar.

	Support Departments		Producing Departments
	Human Resources	General Factory		Fabricating	Assembly
Direct costs
Allocate:
General Factory
Human Resources
Total after allocation

**Sequential (Step) Method of Support Department Cost Allocation**

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

**Support Departments**

- **Human Resources**
- Direct Costs: $165,000
- **General Factory**
- Direct Costs: $380,000

**Producing Departments**

- **Fabricating**
- Direct Costs: $114,200
- **Assembly**
- Direct Costs: $90,000

**Normal Activity:**

- **Number of employees:**
- General Factory: 40
- Fabricating: 70
- Assembly: 150

- **Square footage:**
- Human Resources: 1,800
- Fabricating: 5,500
- Assembly: 13,200

The costs of the Human Resources Department are allocated based on the number of employees, and the costs of the General Factory are allocated based on square footage. The support departments are ranked in order from highest cost to lowest cost.

**Required:**

1. **Calculate the allocation ratios** (rounded to four significant digits) for the four departments using the sequential 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**

2. **Using the sequential method, allocate the costs** of the Human Resources and General Factory departments to the Fabricating and Assembly departments. If an amount is zero, enter "0". Round your answers to the nearest dollar.

**Support Departments**

- **Human Resources:**
- Allocate to Fabricating and Assembly

- **General Factory:**
- Allocate to Fabricating and Assembly

**Graph/Diagram Explanation:**

The diagram includes tables for allocating costs using the sequential (step) method, with sections for input and calculations of allocation ratios for the distribution of Human Resources and General Factory costs to the Fabricating and Assembly departments. Each box is intended for inputting calculated values based on the allocation criteria.

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