Direct Method of Support Department Cost AllocationValron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support DepartmentsProducing Departments HumanResourcesGeneralFactoryFabricatingAssemblyDirect costs$170,000$350,000$114,800$95,000Normal activity: Number of employees—6080170Square footage1,000—5,70013,300The 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: **Cost Allocation in Valron Company**Valron Company operates with two support departments: Human Resources and General Factory, and two producing departments: Fabricating and Assembly. The financial elements are distributed as follows:### Direct Costs- **Support Departments:** - Human Resources: $170,000 - General Factory: $350,000- **Producing Departments:** - Fabricating: $114,800 - Assembly: $95,000### Allocation Basis- **Human Resources** costs are allocated based on the number of employees.- **General Factory** costs are allocated based on square footage.### Normal Activity Metrics- **Number of Employees:** - General Factory: Not applicable - Fabricating: 80 - Assembly: 170- **Square Footage:** - Human Resources: 1,000 sq. ft. - General Factory: 5,700 sq. ft. - Fabricating: 13,300 sq. ft.### Required Task1. **Calculate Allocation Ratios:** - This involves determining the proportion of resources from each support department used by the producing departments. For any calculations resulting in zero, enter "0". Answers should be rounded to the nearest cent. **Proportion of Driver Used by Departments:** | | Human Resources | General Factory | Fabricating | Assembly | |-------------------|-----------------|-----------------|-------------|----------| | **Human Resources** | | | | | | **General Factory** | | | | |2. **Direct Method Allocation:** - Allocate costs from Human Resources and General Factory to the Fabricating and Assembly departments using the direct method. Enter "0" for any zero amounts. **Cost Allocation Table:** **Support Departments:** | | Human Resources | General Factory | |-------------------|-----------------|-----------------| | **Direct costs** | $ | $ | | **Allocate:** | $ | $ | | **General Factory** | $ | $ | **Producing Departments:** | | Fabricating | Assembly | |----------|-------------|----------| | | $ | $ |### ConclusionBy using the outlined method, Valron Company effectively allocates its support department costs to the

1. Calculation of cost allocation ratio using direct method : Given that, The cost of human…

Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments Human General Resources Factory Fabricating Assembly Direct costs $170,000 $350,000 $114,800 $95,000 Normal activity: Number of employees 60 s0 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 footage. Valron Company uses the direct method of support department cost allocation. I on Required: 1. Calculate the allocation ratios for the four departments using the direct method. Ir an amount is zero, enter "0". Round your answer to the nearest cent. Proportion of Driver Used by Human Resources General Factory Fabricating Assembly Human Resources General Factory 2. Using the direct 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". Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs Allocate: Human Resources General Factory Total after allocation

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q