Sequential Method of Support Department Cost Allocation Stevenson Company is div
ID: 2424932 • Letter: S
Question
Sequential Method of Support Department Cost Allocation
Stevenson Company is divided into two operating divisions: Battery and Small Motors. Assume that Stevenson uses the sequential method to allocate support department costs to the operating divisions. Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. General Factory is allocated first in the sequential method for the company. Support department cost allocations are based on the following data:
1. Calculate the allocation ratios for Power and General Factory. (Note: Carry these calculations out to four decimal places.)
Allocation ratios for General Factory
Allocation ratios for Power
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 DivisionsPower General Factory
Battery Small Motors Overhead costs $160,000 $430,000 $163,000 $84,600 Machine hours 2,000 2,000 8,500 2,000 Square footage 1,000 1,500 5,000 17,500 Direct labor hours 18,000 60,000
Support Departments Operating Divisions Small Power General Factory Battery Motors Direct costs Allocate: General Factory Power Total 3. Assume divisional overhead rates are based on direct labor hours. Calculate the overhead rate for the Battery Division and for the Small Motors Division. Round overhead rates to the nearest cent. Battery overhead rate Small Motors overhead rate
Explanation / Answer
5
E
F
G
H
I
J
5
E
F
G
H
I
J
6
Answer 1
6
Answer 1
7
Support Departments
Operating Divisions
Total
7
Support Departments
Operating Divisions
Total
8
Power
General Factory
Battery
Small Motors
8
Power
General Factory
Battery
Small Motors
9
Machine hours
8,500
2,000
10,500
9
Machine hours
8,500
2,000
SUM(G9:I9)
10
Power allocation ratio
81%
19%
10
Power allocation ratio
H9/J9
I9/J9
11
11
12
Square footage
1,000
5,000
17,500
23,500
12
Square footage
1,000
5,000
17,500
SUM(F12:I12)
13
General factory OH allocation ratio
4%
21%
74%
13
General factory OH allocation ratio
F12/J12
H12/J12
I12/J12
14
14
15
Answer 2
15
Answer 2
16
Support Departments
Operating Divisions
16
Support Departments
Operating Divisions
17
Power
General Factory
Battery
Small Motors
Total
17
Power
General Factory
Battery
Small Motors
Total
18
Overhead costs
1,60,000
4,30,000
1,63,000
84,600
8,37,600
18
Overhead costs
1,60,000
4,30,000
1,63,000
84,600
SUM(F18:I18)
19
Allocate
19
Allocate
20
General factory
18,298
-4,30,000
91,489
3,20,213
0
20
General factory
G18*F13
-4,30,000
G18*H13
G18*I13
SUM(F20:I20)
21
Power
-1,78,298
1,44,336
33,961
0
21
Power
-1,78,298
144336.37
33961.499
SUM(F21:I21)
22
TotalCost
0
0
3,98,826
4,38,774
8,37,600
22
TotalCost
SUM(F18:F21)
SUM(G18:G21)
SUM(H18:H21)
SUM(I18:I21)
SUM(J18:J21)
23
23
24
Answer 3
24
Answer 3
25
25
26
Operating Divisions
26
Operating Divisions
27
Battery
Small Motors
Total
27
Battery
Small Motors
Total
28
Total Overheads
3,98,826
4,38,774
8,37,600
28
Total Overheads
H22
I22
J22
29
Direct Labour
18,000
60,000
78,000
29
Direct Labour
18,000
60,000
H29+I29
30
Per unit
22.16
7.31
30
Per unit
H28/H29
I28/I29
5
E
F
G
H
I
J
5
E
F
G
H
I
J
6
Answer 1
6
Answer 1
7
Support Departments
Operating Divisions
Total
7
Support Departments
Operating Divisions
Total
8
Power
General Factory
Battery
Small Motors
8
Power
General Factory
Battery
Small Motors
9
Machine hours
8,500
2,000
10,500
9
Machine hours
8,500
2,000
SUM(G9:I9)
10
Power allocation ratio
81%
19%
10
Power allocation ratio
H9/J9
I9/J9
11
11
12
Square footage
1,000
5,000
17,500
23,500
12
Square footage
1,000
5,000
17,500
SUM(F12:I12)
13
General factory OH allocation ratio
4%
21%
74%
13
General factory OH allocation ratio
F12/J12
H12/J12
I12/J12
14
14
15
Answer 2
15
Answer 2
16
Support Departments
Operating Divisions
16
Support Departments
Operating Divisions
17
Power
General Factory
Battery
Small Motors
Total
17
Power
General Factory
Battery
Small Motors
Total
18
Overhead costs
1,60,000
4,30,000
1,63,000
84,600
8,37,600
18
Overhead costs
1,60,000
4,30,000
1,63,000
84,600
SUM(F18:I18)
19
Allocate
19
Allocate
20
General factory
18,298
-4,30,000
91,489
3,20,213
0
20
General factory
G18*F13
-4,30,000
G18*H13
G18*I13
SUM(F20:I20)
21
Power
-1,78,298
1,44,336
33,961
0
21
Power
-1,78,298
144336.37
33961.499
SUM(F21:I21)
22
TotalCost
0
0
3,98,826
4,38,774
8,37,600
22
TotalCost
SUM(F18:F21)
SUM(G18:G21)
SUM(H18:H21)
SUM(I18:I21)
SUM(J18:J21)
23
23
24
Answer 3
24
Answer 3
25
25
26
Operating Divisions
26
Operating Divisions
27
Battery
Small Motors
Total
27
Battery
Small Motors
Total
28
Total Overheads
3,98,826
4,38,774
8,37,600
28
Total Overheads
H22
I22
J22
29
Direct Labour
18,000
60,000
78,000
29
Direct Labour
18,000
60,000
H29+I29
30
Per unit
22.16
7.31
30
Per unit
H28/H29
I28/I29
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.