(Appendix 4B) Direct Method of Support Department Cost AllocationStevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the direct method. Power costs are allocated on thebasis of the number of machine hours and general factory costs on the basis of square footage. Support department cost allocations using the direct method are based on the following data:Operating DivisionsOverhead costsMachine hoursSquare footageDirect labor hoursRequired:BatterySupport DepartmentsSmall MotorsPower$160,0002,0001,000GeneralFactoryBattery$430,000 $163,0002,0008,000Power1,5001. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places, if necessary.)General Factory0.8000 ✓0.2727 X7,50018,000SmallMotors$84,6002,00020,00060,0000.2000 X0.72732. Allocate the support service costs to the operating divisions. Round all amounts to the nearest dollar. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enterzero ("0").

Cost Allocation -The process of determining and allocating the cost's component elements to each…

Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the direct method. Power costs are asis of the number of machine hours and general factory costs on the basis of square footage. Support department cost allocations using the direct method are based on the following data: Support Departments Operating Divisions Overhead costs Machine hours Square footage Direct labor hours Required: Power $160,000 2,000 1,000 Battery Small Motors General Factory Battery $430,000 $163,000 2,000 8,000 1,500 7,500 18,000 Power 1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places, if necessary.) General Factory 0.2000 X 0.7273 ✔ 2. Allocate the support service costs to the operating divisions. Round all amounts to the nearest dollar. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box bl 0.8000 ✓ Small Motors $84,600 0.2727 X 2,000 20,000 60,000

Stevenson Company is divided into two operating divisions: Battery and Small Motors. The company allocates power and general factory costs to each operating division using the direct method. Power costs are asis of the number of machine hours and general factory costs on the basis of square footage. Support department cost allocations using the direct method are based on the following data: Support Departments Operating Divisions Overhead costs Machine hours Square footage Direct labor hours Required: Power $160,000 2,000 1,000 Battery Small Motors General Factory Battery $430,000 $163,000 2,000 8,000 1,500 7,500 18,000 Power 1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places, if necessary.) General Factory 0.2000 X 0.7273 ✔ 2. Allocate the support service costs to the operating divisions. Round all amounts to the nearest dollar. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box bl 0.8000 ✓ Small Motors $84,600 0.2727 X 2,000 20,000 60,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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