Question

Comparison of Methods of Allocation 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: Use the rounded values for subsequent calculations. Support Departments Operating Divisions Power General Factory Pottery Retail Overhead costs $140,400 $171,600 $96,000 $56,000 Machine hours 2,000 2,500 7,000 3,000 Square footage 2,500 1,700 4,000 6,000 Round all allocation ratios to four significant digits. Round all allocated amounts to the nearest dollar.

Answer 1

Solution:

From	Service Department Cost Allocation - Direct Method
	Service Department		Production Departments
	Power	General Factory	Pottery	Retail
Direct charges of department	$140,400.00	$171,600.00	$96,000	$56,000
Power (7:3)	-$140,400.00		$98,280	$42,120
General factory (4:6)		-$171,600.00	$68,640	$102,960
Total	$0.00	$0.00	$262,920	$201,080