Reference no: EM132841465

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 $162,000 $98,000 $58,000

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.

Required -

1. Allocate the support service costs using the direct method.

2. Allocate the support service costs using the sequential method. The support departments are ranked in order of highest cost to lowest cost.

3. Allocate the support service costs using the reciprocal method.