Business, 06.06.2020 21:01 theodoredenetz8316

Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.

Human Resources General Factory Fabricating Assembly
Direct costs $160,000 $340,000 $114600 $93,000
Normal activity:
Number of employees 60 80 170
Square footage 1000 5700 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.

Valron Company uses the reciprocal method to allocate support department costs.

Required:
a. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the reciprocal method.
b. Develop a simultaneous equations system of total costs for the support departments. If required, round your answers to four decimal places. Use these numbers for subsequent calculations.
c. Using the reciprocal method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments.

Answers: 3

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Reciprocal Method of Support Department Cost Allocation Valron Company has two support departments,...