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Support department cost allocation-sequential method Crystal Scarves & Co. produces winter scarves. The scarves are produced in the Cutting and Sewing departments. The Maintenance and Security departments support these production departments, and allocate costs based on machine hours and square feet, respectively. Information about each department is provided in the following table: Department Total Cost Number of Employees Machine Hours Square Feet Maintenance Department $ 2,300 800 Security Department 3,000 600 Cutting Department 19,600 3,700 3,200 Sewing Department 20,800 5,550 4,000 Using the sequential method and allocating the support department with the highest costs first, allocate all support department costs to the production departments. Then compute the total cost of each production department. Cutting Sewing Department Department 18 Production departments' total costs $

Answer 1

Answer: Using Sequential method, we shall allocate the support department’s cost having highest cost first among other support & production departments.

In given question, cost of Security department with highest cost $3000 shall be allocate first.

Department	No. of employees	Machine Hours	Square Feet	Total Cost (A)	Cost Allocation-Security Deptt. (B)	Cost Allocation-Maintenance Deptt. (C)	Total Cost after allocation (A+B+C)
Maintenance	6	57	800	2,300.00	300.00	-	2,600.00
Security	4	0	600	3,000.00	-	-	3,000.00
Cutting	2	3,700	3,200	19,600.00	1,200.00	919.82	21,719.82
Sewing	18	5,550	4,000	20,800.00	1,500.00	1,379.73	23,679.73

Total cost of production deptt.(Cutting deptt)= $ 21,719.82

Total cost of production deptt. (Sewing deptt)= $23,679.73

Working Notes:

Per Square Feet cost of Security Department= Total Cost/Total Square feet

=3000/(800+3200+4000)

=$0.375 per square feet

Per Machine Hour cost of Maintenance Department= Total Cost/Total machine Hours

=2300/(0+3700+5550)

=$0.248 per machine hour (approximately)