Question

Appendix 4B) Assigning Support Department Costs by Using the Direct Method Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and 52. The activity driver for S1 is number of employees, and the activity driver for S2 is number of maintenance hours. The following data pertain to Quillen: Support Departments Producing Departments si Cutting Sewing Direct costs $180,000 $150,000 $122,000 $90,500 S2 Normal activity: Number of employees 63 147 Maintenance hours 1,200 16,000 4,000 Required: 1. Calculate the cost assignment ratios to be used under the direct method for Departments Si and S2. (Note: Each support department will have two ratios-one for Cutting and the other for Sewing.) Enter your answers as decimal values. S1 S2 4 X Cutting Sewing 30 x 1 47 X 147 2. Allocate the support department costs to the producing departments by using the direct method. Use a minus sign to indicate a subtraction. For those boxes in which no entry is required, leave the box blank or enter zero ("O"). Support Departments Producing Departments Allocate: S1 Cutting Sewing Direct costs $ 180,000 $ 150,000 $ 122,000 $ 90,500

Answer 1

Solution 1:

Allocation Ratios	S1	S2
Cutting	0.30	0.80
Sewing	0.70	0.20

Solution 2:

From	Service Department Cost Allocation - Direct Method
	Service Department		Production Departments
	S1	S2	Cutting	Sewing
Direct charges of department	$180,000	$150,000	$122,000	$90,500
S1 (0.30:0.70)	-$180,000	$0	$54,000	$126,000
S2 (0.80:0.20)	$0	-$150,000	$120,000	$30,000
Total	$0	$0	$296,000	$246,500