Kế toán, kiểm toán - Chapter 17: Allocation of support activity costs and joint costs
How are service
department costs
charged to production
departments?
First, we identify the factor
that drives costs in the
service department.
This cost driver is called
the allocation base.
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Allocation of Support Activity Costs and Joint CostsChapter 17First, we identify the factor that drives costs in the service department.This cost driver is called the allocation base.How are service department costs charged to production departments?Service Department Cost AllocationProduction DepartmentsService DepartmentsCarry out the central purposes of an organization.Provide support that facilitates the activities of production departments.Service Department Cost AllocationsupportService Department(Cafeteria)Service Department(Accounting)Service Department(Personnel)Production Department(Machining)Production Department(Assembly)The ProductService Department Cost AllocationFirst Stage AllocationsService department costs are allocated to production departments.Service Department(Cafeteria)Service Department(Accounting)Service Department(Personnel)Production Department(Machining)Production Department(Assembly)The ProductSecond Stage AllocationsProduction department overhead costs, plus allocated service department costs, are applied to products using departmental predetermined overhead rates.Service Department Cost AllocationSelecting Allocation BasesPersonnel:Number of employeesReceiving:Units handledSecurity:Square footagePower:Kilowatt hoursCafeteria:Number of employeesCustodial:Square footageAccounting:Staff hoursTypical Allocation BasesInterdepartmental ServicesService Department(Cafeteria)Service Department(Custodial)Production Department(Machining)Production Department(Assembly)POWER DEPARTMENTInterdepartmental ServicesProblemAllocating costs when service departments provide services to each otherSolutionsDirect MethodStep MethodDirect MethodService Department(Cafeteria)Service Department(Custodial)Production Department(Machining)Production Department(Assembly)Cost of services between servicedepartments are ignored and allcosts are allocated directly to production departments.Step MethodService Department(Cafeteria)Service Department(Custodial)Production Department(Machining)Production Department(Assembly)Service department costs are allocated to other servicedepartments and to production departments, usually starting with the service department that serves the largest number of other service departments. Step MethodService Department(Cafeteria)Service Department(Custodial)Production Department(Machining)Production Department(Assembly)Once a service department’s costs are allocated, other service departments’ costs are not allocated back to it. Fixed Versus Variable CostsAre fixed and variable costs allocated differently?ResultWhen one department decreases activity to reduce allocations, all departments are penalized because the charge per use increases. Remember, total fixed costs do not change as activity changes.Fixed Versus Variable CostsProblemAllocating common fixed costs using a variable activity allocation baseFixed Versus Variable CostsProblemAllocating common fixed costs using a variable activity allocation baseSolutionUse dual allocation method, allocating fixed and variable costs separately.Dual Cost AllocationVariable CostsCharge to production departments at a budgeted rate times actual short-run usage of the allocation base.Fixed CostsAllocate budgeted amounts to operating departments in proportion to the long-run average usage of the allocation base.
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