**Cost Allocation at Virgin River Inc.**Virgin River Inc. is responsible for producing horse and rancher equipment. The cost allocation process involves assigning costs from Support Department 1 based on the number of employees, while costs from Support Department 2 are allocated based on asset value. Below is a table that outlines the relevant department details. Using the sequential method of support department cost allocation, your task is to determine the total costs from Support Department 1 that should be allocated to Support Department 2, as well as to each of the production departments.| | Support Department 1 | Support Department 2 | Production Department 1 | Production Department 2 ||-----------------------|-----------------------|----------------------|-------------------------|-------------------------|| **Number of employees** | 9 | 7 | 25 | 18 || **Asset value** | $1,150 | $670 | $6,230 | $5,100 || **Department cost** | $20,000 | $15,500 | $99,000 | $79,000 |### Explanation- **Support Department 1**: - Number of Employees: 9 - Asset Value: $1,150 - Department Cost: $20,000- **Support Department 2**: - Number of Employees: 7 - Asset Value: $670 - Department Cost: $15,500- **Production Department 1**: - Number of Employees: 25 - Asset Value: $6,230 - Department Cost: $99,000- **Production Department 2**: - Number of Employees: 18 - Asset Value: $5,100 - Department Cost: $79,000This table illustrates how different criteria such as the number of employees and asset values are utilized in the allocation method. The goal is to distribute the support department costs accurately to ensure efficient budgeting and expense management.

Answered: Image /qna-images/answer/15b2349d-675e-4514-8edf-202755c50d7a.jpgAns Sequential Method (Step down Allocation) PD1 PD2 Total Production department total costs $119,063 $94,437 $213,500 Round nearest to dollar

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Virgin River Inc. produces horse and rancher equipment. Costs from Support Department 1 are allocated based on the number of employees. Costs from Support Department 2 are allocated based on asset value. Relevant department information is provided in the following table. Using the sequential method of support department cost allocation, determine the total costs FROM Support Department 1 (assuming they are allocated first) that should be allocated to Support Department 2 AND to each of the production departments. Support Department 1 Support Department 2 Production Production Department 1 Department 2 Number of employees 9. 7 25 18 Asset value $1,150 $670 $6,230 $5,100 Department cost $20,000 $15,500 $99,000 $79,000

Virgin River Inc. produces horse and rancher equipment. Costs from Support Department 1 are allocated based on the number of employees. Costs from Support Department 2 are allocated based on asset value. Relevant department information is provided in the following table. Using the sequential method of support department cost allocation, determine the total costs FROM Support Department 1 (assuming they are allocated first) that should be allocated to Support Department 2 AND to each of the production departments. Support Department 1 Support Department 2 Production Production Department 1 Department 2 Number of employees 9. 7 25 18 Asset value $1,150 $670 $6,230 $5,100 Department cost $20,000 $15,500 $99,000 $79,000

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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Which one of the following is not a step in allocating the support department cost to the production department? Select one: a. Trace all the overhead cost b. Divide the departments in to support and producing departments c. Undertake a breakeven analysis d. Divide the company in departments
B 1.
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