(Appendix 48) Direct Method of Support Department Cost Allocation 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 allocated on the basis 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 General Small Power Factory Battery Motors Overhead costs $160,000 $430,000 $163,000 184,600 Machine hours 2,000 2,000 7,500 2,000 Square footage 1,000 1,500 10,000 20,000 Direct labor hours 18,000 60,000 Required: 1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places, if necessary.) Power General Factory 0.8750 X Battery 0.8750 X Small Motors 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 blank or enter zero ("0"). Support Departments Operating Divisions
(Appendix 48) Direct Method of Support Department Cost Allocation 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 allocated on the basis 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 General Small Power Factory Battery Motors Overhead costs $160,000 $430,000 $163,000 184,600 Machine hours 2,000 2,000 7,500 2,000 Square footage 1,000 1,500 10,000 20,000 Direct labor hours 18,000 60,000 Required: 1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places, if necessary.) Power General Factory 0.8750 X Battery 0.8750 X Small Motors 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 blank or enter zero ("0"). Support Departments Operating Divisions
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter5: Support Department And Joint Cost Allocation
Section: Chapter Questions
Problem 10E: Support department cost allocation comparison Refer to your answers to Exercises 7-9. Compare the...
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