Support Departments Producing Departments Human General Resources Factory Fabricating Assembly S160,000 $340,000 $114,600 $93,000 Direct costs Normal activity: Number of employees Square footage 60 80 170 1,000 5,700 13,300
Valron Company has two support departments, Human Resources and General
Factory, and two producing departments, Fabricating and Assembly.
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. Valron Company uses the direct method of support department cost
allocation.
Required:
1. Calculate the allocation ratios for the four departments using the direct
method.
2. Using the direct method, allocate the costs of the Human Resources and
General Factory departments to the Fabricating and Assembly departments.
3. What if the General Factory Department had 40 employees? How would that
affect the allocation of Human Resources Department costs to the Fabricating
and Assembly departments?
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