Using the sequential method, Pone Hill Company allocates Janitorial Department costs based on square footage serviced. It allocates Cafeteria Department costs based on the number of employees served. It has determined to allocate Janitorial costs before Cafeteria costs. It has the following information about its two service departments and two production departments, Cutting and Assembly: Costs Square Feet Number of Employees
Janitorial Department $450,000   100       20       
Cafeteria Department 200,000   10,000       10       
Cutting Department 1,500,000   2,000       60       
Assembly Department 3,000,000   8,000       20      

The percentage (proportional) usage of the Cafeteria Department by the Assembly Department is:

a. 75%
b. 18.2%
c. 22.2%
d. 25%

Pone Hill Company

The percentage (proportional) usage of the Cafeteria Department by the Assembly Department is:

d. 25%

Explanation:

a) Data and Calculations:

                                           Costs    Square Feet   Number of Employees

Janitorial Department    $450,000        100                        20

Cafeteria Department      200,000   10,000                        10

Cutting Department       1,500,000    2,000                       60

Assembly Department  3,000,000    8,000                       20

Janitorial departments costs = square footage service

Cafeteria department costs = number of employees

Cost Allocation:

                       Janitorial    Cafeteria      Cutting       Assembly           Total

Direct costs  $450,000   $200,000  $1,500,000  $3,000,000 $5,150,000

Janitorial       (450,000)     225,000         45,000        180,000    0

Cafeteria                           (425,000)       318,750         106,250   0

Total allocated costs                          $1,863,750   $3,286,250 $5,150,000

Allocation of costs:

Janitorial:

Cafeteria = $225,000 ($450,000 * 10,000/20,000)

Cutting = $45,000 ($450,000 * 2,000/20,000)

Assembly = $180,000 ($450,000 * 8,000/20,000)

Cafeteria:

Cutting = $318,750 ($425,000 * 60/80)

Assembly = $106,250 ($425,000 * 20/80)

Percentage usage of the Cafeteria Department by the Assembly = 25% ($106,250/$318,750 * 100)

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

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