Duweynie Pottery, Inc., is divided into two operating divisions: Pottery and Retail. The company allocates Power and General Factory department costs to each operating division. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations. Support Departments Operating Divisions Power General Factory Pottery Retail Overhead costs $140,400 $162,000 $97,000 $56,000 Machine hours 2,000 2,500 7,000 3,000 Square footage 2,500 1,700 4,000 6,000 Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar. Required: 1. Allocate the support service costs using the direct method. 2. Allocate the support service costs using the sequential method. The support departments are ranked in order of highest cost to lowest cost.
Duweynie Pottery, Inc., is divided into two operating divisions: Pottery and Retail. The company allocates Power and General Factory department costs to each operating division. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. No effort is made to separate fixed and variable costs; however, only budgeted costs are allocated. Allocations for the coming year are based on the following data: Use the rounded values for subsequent calculations. Support Departments Operating Divisions Power General Factory Pottery Retail Overhead costs $140,400 $162,000 $97,000 $56,000 Machine hours 2,000 2,500 7,000 3,000 Square footage 2,500 1,700 4,000 6,000 Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar. Required: 1. Allocate the support service costs using the direct method. 2. Allocate the support service costs using the sequential method. The support departments are ranked in order of highest cost to lowest cost.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter7: Allocating Costs Of Support Departments And Joint Products
Section: Chapter Questions
Problem 21E: Refer to the data in Exercise 7.20. The company has decided to use the sequential method of...
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Problem 7.35 (Algorithmic)
Duweynie Pottery, Inc., is divided into two operating divisions: Pottery and Retail. The company
allocates Power and General Factory department costs to each operating division. Power costs
are allocated on the basis of the number of machine hours and general factory costs on the basis
of square footage. No effort is made to separate fixed and variable costs; however, only budgeted
costs are allocated. Allocations for the coming year are based on the following data: Use the
rounded values for subsequent calculations.
Support Departments
Operating Divisions
Power
General Factory
Pottery
Retail
Overhead costs
$140,400
$162,000
$97,000
$56,000
Machine hours
2,000
2,500
7,000
3,000
Square footage
2,500
1,700
4,000
6,000
Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest
dollar.
Required:
1. Allocate the support service costs using the direct method.
2. Allocate the support service costs using the sequential method. The support departments are
ranked in order of highest cost to lowest cost.
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