Question

Quillen Company manufactures a product in a factory that has two producing departments, Cutting and Sewing, and two support departments, S1 and S2. The activity driver for S1 is the number of employees, and the activity driver for S2 is the number of maintenance hours. The following data pertain to Quillen:

Support Departments

Producing Departments

S1

S2

Cutting

Sewing

Direct costs

RM180,000 

RM150,000 

RM122,000 

RM90,500 

Normal activity:

 Number of employees

— 

30 

63 

147 

 Maintenance hours

1,200 

— 

16,000 

4,000 

REQUIRED:

Calculate the cost assignment ratios to be used under the reciprocal method for S1, S2, Cutting, and Sewing. Carry out your answers to four decimal places.
Allocate the overhead costs to the producing departments by using the reciprocal method.
What methods can managers use to allocate costs of multiple support departments to operating departments? Explain the difference between these methods.​

Answer 1

Explanation:

Direct costs

RM180,000 

RM150,000 

RM122,000 

RM90,500 

Normal activity:

 Number of employees

— 

30 

63 

147 

 Maintenance hours

1,200 

— 

16,000 

4,000 

REQUIRED:

Calculate the cost assignment ratios to be used under the reciprocal method for S1, S2, Cutting, and Sewing. Carry out your answers to four decimal places.

Allocate the overhead costs to the producing departments by using the reciprocal method.

What methods can managers use to allocate costs of multiple support departments to operating departments? Explain the difference between these methods.