Question

A K L M N H I J 1 Part 1 2 Pottery Inc., is divided into 2 operating divisions: Pottery and Retail. The company allocates Power and General Factory department costs to each operating division. 3 Power costs are allocated on the basis of the number of machine hours and general factory costs on the basis of square footage. 4 Allocation for the coming year are based on the following data? Operating Divisions Support Departments General factory Power Department Department $150,000 $160,000 CON Pottery $98,000 Retail $56,000 Direct costs Normal Activity: Machine Hours Square Footage 10 - 2000 1000 - 6.900 4000 3,100 6,000 1 13 Please make sure you review Cornerstone 7.3 and 7.4 before attempting this part of the project. 14 For all requirements, round allocation ratios to four significant digits and round allocated costs to the nearest dollar. 15 16 Required: Complete 1-5 below and all computations below must use cell references. 17 1. Calculate the allocation ratios for the departments using the direct method in the table provided below. Power Department General factory Department Pottery Retail Power Department General factory Department 22 23 2. Using the direct method, allocate the costs of the Power Department and General Factory Department to the Pottery 24 and Retail departments in the table provided below. Power Department $150,000 General factory Department $160.000 Pottery $98,000 Retail $56,000 Direct costs Allocate: Power Department General factory Department Total After Allocation 33 3. Determine the support department to allocate first, by ranking the support departments in order of the percentage of service provided to the other support department. 37 38 4. Develop a table with the allocation ratios for the departments using the sequential (step) method showing the support department first that provides the greater service to the other support department. 39 40 41 42 43 44 5. Using the sequential method, allocate the costs of the power department and general factory department to the pottery 45 and retail departments in the table provided below. 46 Power Department $150.000 General factory Department $160.000 Pottery $98.000 Retail $56,000 Direct costs Allocation: Total After Allocation

Answer 1

1.

	Power Department	General Factory Department	Pottery	Retail
Power Department			0.69	0.31
General Factory Department			0.40	0.60

2.

	Power Department	General Factory Department	Pottery	Retail
Direct Costs	$ 150,000	$ 160,000	$ 98,000	$ 56,000
Allocate :
Power Department	(150,000)	-	103,500	46,500
General Factory Department	-	(160,000)	64,000	96,000
Total After Allocation	0	0	$265,500	$198,500