Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

Exercise 13

Sequential (Step) Method of Support Department Cost Allocation
Refer to Cornerstone Exercise 7.3. Now assume that 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.
2. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. (Round all allocated costs to the nearest dollar.)
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?