Sequential (Step) Method of Support Department Cost Allocation

Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.

The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of square footage. Valron Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost.

Required:

1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the sequential method. Enter ratios as decimal values carried to four decimal places if rounding is required. If an amount is zero, enter "0".

Â	Proportion of Driver Used by
Â	Human Resources	General Factory	Fabricating	Assembly
Human Resources	Â	Â	Â	Â
General Factory	Â	Â	Â	Â

2. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. Enter all your answers as positive amounts. If an amount is zero, enter"0".

Â	Support Departments		Â	Producing Departments
Â	Human Resources	General Factory	Â	Fabricating	Assembly
Direct costs	$	$	Â	$	$
Allocate:	Â	Â	Â	Â	Â
General Factory	 Â	 Â	Â	 Â	 Â
Human Resources	 Â	 Â	Â	 Â	 Â
Total after allocation	$	$	Â	$	$

3. What if the allocation ratios in Requirement 1 were rounded to six significant digits rather than four? How would that affect any rounding error in the allocation of costs?