Sequential (Step) Method of Support Department Cost Allocation.

Sequential (Step) Method of Support Department Cost Allocation

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


Support DepartmentsProducing Departments
Direct costs$180,000$320,000$114,100$99,000
Normal activity:
Number of employees5070170
Square footage1,1005,70013,800

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. Now assume that Chekov Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost.


1. Calculate the allocation ratios (rounded to six significant digits) for the four departments using the sequential method. If an amount is zero, enter “0”. Use the rounded values for subsequent calculations.

Proportion of Driver Used by
Human ResourcesGeneral FactoryFabricatingAssembly
Human Resourcesfill in the blank 1fill in the blank 2fill in the blank 3fill in the blank 4
General Factoryfill in the blank 5fill in the blank 6fill in the blank 7fill in the blank 8

2. Using the sequential method, allocate the costs of the Human Resources and General Factory departments to the Fabricating and Assembly departments. If an amount is zero, enter”0″. Round your answers to the nearest dollar.

Support DepartmentsProducing Departments
Human ResourcesGeneral FactoryFabricatingAssembly
Direct costs$fill in the blank 9$fill in the blank 10$fill in the blank 11$fill in the blank 12
  General Factory  fill in the blank 13  fill in the blank 14  fill in the blank 15  fill in the blank 16
  Human Resources  fill in the blank 17  fill in the blank 18  fill in the blank 19  fill in the blank 20
Total after allocation$fill in the blank 21$fill in the blank 22$fill in the blank 23$fill in the blank 24

Feedback Area





1. The sequential method, as well as direct and reciprocal methods, allocates all support department costs to the producing departments.

2. The sequential (or step) method ranks support departments and allocates from top ranking to lower ranking. Some reciprocity is recognized. After allocation, zero cost remains in the support departments. Pre-allocation total overhead must equal post-allocation overhead.

See Example 7.4.





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