What allocation bases can we use? Could you provide some examples of allocation bases used to...
What allocation bases can we use? Could you provide some examples of allocation bases used to allocate support-department cost pools to operating departments?
Homework Answers
Answer:
There are three methods for allocating service department costs:
*Direct method
*Step method
* Resiprocal method
The resiprocal method is theoretically the most defensible method because it fully recognizes the mutual services provided among all departments, irrespective of whether those departments are operating or support departments.
Examples of bases used to allocate support department cost pools to operating departments include the number of employees, Square feet of space, Number of direct labor hours and Machine hours.
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What allocation bases can we use? Could you provide some
examples of allocation bases used to...
cost allocation
Vines Company is a manufacturer of women’s and men’s swimsuits. The company uses a dual-ratesystem to allocate support costs. Last year’s support departments’ fixed and variable costs are asfollows:AccountingHumanResources Janitorial TotalVariable costs $18,420 $22,104 $60,360 $100,884Fixed costs $55,260 $100,696 $60,360 $216,316Total cost $73,680 $122,800 $120,720 $317,200Allocation base amounts for all the departments are as follows:AccountingHumanResources Janitorial Women’s Men’s TotalEmployees 2 2 4 10 6 24Time spent for accounting 15% 10% 20% 30% 25% 100%Time spent cleaning 5% 10% 15% 30%...
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The following data is available for September 2017: DIRECT ALLOCATION DATA STEP-DOWN ALLOCATION DATA REQUIREMENTS O-books,...
The following data is available for September
2017:
DIRECT ALLOCATION DATA
STEP-DOWN ALLOCATION DATA
REQUIREMENTS
O-books, an online book retailer, has two operating departments—corporate sales and consumer sales—and two support departments—human resources and information systems. Each sales department conducts merchandising and marketing operations independently. O-books uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of 0-books reads a widely used textbook that states that "the reciprocal method is conceptually the...
Devon allocates support department costs using the direct method and estimated costs. The support department costs...
Devon allocates support department costs using the direct method and estimated costs. The support department costs are budgeted at $88,000 for Department A, $63,000 for Department B, and $40,000 for Department C. These costs are allocated using the proportion of total cost the firm would pay to an outside service provider: Support Departments Operating Departments Dept. A Dept. B Dept. C Casting Machine Direct costs $88,000 $63,000 $40,000 - - Labour hours 6,000 4,000 Machine hours 2,000 10,000 Costs if...
Company has prepared department overhead budgets for budgeted-volume levels before allocations as...
Company has prepared department overhead budgets for
budgeted-volume levels before allocations as follows:
Management has decided that the most appropriate inventory costs
are achieved by using individual department overhead rates. These
rates are developed after support-department costs are allocated to
operating departments. Bases for allocation are to be selected from
the following:
Support departments:
Building and grounds
$56,000
Personnel
1,140
General plant administration
14,040
Cafeteria: Operating loss
300
Storeroom
6,244
$77,724
Operating departments:
Machining
$34,000
Assembly
49,000
83,000
Total for...
1. What types of costs are allocated? What is a support department? What is a producing...
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...
Sequential (Step) Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources...
Sequential (Step) Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs $170,000 $330,000 $114,600 $91,000 Normal activity: Number of employees — 50 70 160 Square footage 1,100 — 5,900 13,000 Resources Department are allocated on the basis of number of employees, and the costs of General Factory are allocated on the basis of...
Sequential (Step) Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources...
Sequential (Step) Method of Support Department Cost Allocation Valron Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly. Support Departments Producing Departments Human Resources General Factory Fabricating Assembly Direct costs $160,000 $340,000 $114,600 $93,000 Normal activity: Number of employees — 60 80 170 Square footage 1,000 — 5,700 13,300 The costs of the Human Resources Department are allocated on the basis of number of employees, and the costs of General Factory are...
The Southern Wind Company has prepared department overhead budgets for budgeted-volume levels bef...
The Southern Wind Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows: 囲click the icon to view the department overhead budgets.) Management has decided that the most appropriate inventory costs are achieved by using individual department overhead rates. These rates are developed after support-department costs are allocated to operating departments. Bases for allocation are to be selected from the following: 囲(Click the icon to view the data.) Read the requirements Support departments: $30,000 1,350 77,136 1,049...
The following data is available for September
2017:
DIRECT ALLOCATION DATA
STEP-DOWN ALLOCATION DATA
REQUIREMENTS
O-books, an online book retailer, has two operating departments—corporate sales and consumer sales—and two support departments—human resources and information systems. Each sales department conducts merchandising and marketing operations independently. O-books uses number of employees to allocate human resources costs and processing time to allocate information systems costs. The controller of 0-books reads a widely used textbook that states that "the reciprocal method is conceptually the...
Company has prepared department overhead budgets for
budgeted-volume levels before allocations as follows:
Management has decided that the most appropriate inventory costs
are achieved by using individual department overhead rates. These
rates are developed after support-department costs are allocated to
operating departments. Bases for allocation are to be selected from
the following:
Support departments:
Building and grounds
$56,000
Personnel
1,140
General plant administration
14,040
Cafeteria: Operating loss
300
Storeroom
6,244
$77,724
Operating departments:
Machining
$34,000
Assembly
49,000
83,000
Total for...
The Southern Wind Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows: 囲click the icon to view the department overhead budgets.) Management has decided that the most appropriate inventory costs are achieved by using individual department overhead rates. These rates are developed after support-department costs are allocated to operating departments. Bases for allocation are to be selected from the following: 囲(Click the icon to view the data.) Read the requirements Support departments: $30,000 1,350 77,136 1,049...
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