Question

1. What types of costs are allocated? What is a support department? What is a producing department? What types of costs are allocated? Why is cost allocation important for companies to consider?

2. What are the differences between single charging rate and multiple charging rates? What factors might a company consider when determining how to allocate support department costs to a producing department? Give some examples of a type of support department costs and why it might be reasonably allocated to a producing department or departments.

3. What are the three methods of allocation and what are the differences between them? Why might a company choose one method over another?

4. After allocation of overhead to a producing department, how are overhead costs tied to production?

Answer 1

Answer:

1.

Costs which are not straightforwardly recognizable to an office or item are allocated to income creating division or items.

Support Department is the office which provides its types of assistance to other production or income generating divisions. Its services are subordinate or in help to empower main offices or departments to offer its services or selling items.

Producing Department is the place genuine production of products happen implies forms for converting over crude material into finished goods occur.

Organizations distribute cost to income generating divisions for ascertaining the all out cost associated with manufacturing of items which is taken into consideration for setting the proper selling cost.

2.

Single charging rate will be rate decided based on single cost allocation strategy. For instance all the overheads are allotted based on direct work hours or Machine hrs or some other assignment basis.

Various charging rates will be rates decided based on numerous cost allocation techniques. For instance Overheads are first divided into different activities and afterward cost identified with those activities are distributed or allocated based on levels of those activities in different offices or various items. This is Activity Based Costing method.

Factors which organization ought to consider for deciding the allocation basis of cost incorporates the utilization of services of support offices by the producing departments. This can be based on no. of workers or area involved by the producing offices or No.of kinds of items made by the creating or producing divisions and so forth.

Example of support division or department costs incorporates Maintenance Cost, Human Resources costs and so forth.

Note:

As per HOMEWORKLIB RULES we will answer only 2 questions at a time. If you want the answer for remaining questions please upload it as another question.Thank you!