Question

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	6	57	800
Security Department	3,000	4	0	600
Cutting Department	19,600	20	3,700	3,200
Sewing Department	20,800	18	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 Department		Sewing Department
Production departmentsʼ total costs	$		$

Answer 1

Answer

	Cutting	Sewing
Producion department total costs	$ 21,840	$ 23,860

Calculations:

	Maintainance	Security	Cutting	Sewing
Total Cost	$                2,300	$   3,000	$ 19,600	$ 20,800
Security department	$                   300	$ (3,000)	$    1,200	$    1,500
Total	$                2,600	$          -	$ 20,800	$ 22,300
Maintainance department	$              (2,600)	$          -	$    1,040	$    1,560
Total	$                      -	$          -	$ 21,840	$ 23,860

Working Note:

	Maintenance	Security	Cutting	Sewing
Security department	=3,000/8,000*800	-3,000	=3,000/8,000*3,200	=3,000/8,000*4,000
Maintenance department	-2,600	0	=2,600/9,250*3,700	=2,600/9,250*5,550

In case of any doubt, please comment.