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: Solve for General Factory first then Power. Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar. Required: Provide the missing amounts.
Support Departments Operating Divisions
Power General Factory Pottery Retail
Overhead costs $ 150,000 $ 160,000 $ 98,000 $ 56,000
Machine hours 2,000 1,000 6,900 3,100
Square footage 2,000 1,700 4,000 6,000
1. Allocate the support service costs using the direct method.
Allocation Ratios
Pottery Retail
Proportion of machine hours .69 .31
Proportion of square footage .40 .60
Cost Allocations
Pottery Retail
Power $ 103,500 $ 46,500
General Factory 64,000 96,000
Direct costs 98,000 56,000
$ 265,500 $ 198,500
2. Allocate the support service costs using the sequential method. The support departments are ranked in order of highest cost to lowest cost. If an amount is zero, enter "0".
Allocation Ratios
Power General Factory Pottery Retail
Machine hours 0 . 69 .31
Square footage 0
Cost Allocations
Power General Factory Pottery Retail
Direct costs $ 150,000 $ 160,000 $ 98,000 $ 56,000
General Factory $ $
$ $
$ 80,000
Power $ $
$ $
Cost after allocation $0 $0 $ $
3. Allocate the support service costs using the reciprocal method. If an amount is zero, enter "0".
Allocation Ratios
Power General Factory Pottery Retail
Machine hours 0
Square footage 0
Cost Allocations
Pottery Retail
General Factory $ $
Power $ $
Direct costs $ $
Cost after allocation $ $