This document discusses methods for allocating costs across departments including single-rate, dual-rate, and reciprocal cost allocation methods. It provides examples of allocating support department costs using different allocation rates and accounting for actual versus budgeted costs and quantities.
This document discusses methods for allocating costs across departments including single-rate, dual-rate, and reciprocal cost allocation methods. It provides examples of allocating support department costs using different allocation rates and accounting for actual versus budgeted costs and quantities.
This document discusses methods for allocating costs across departments including single-rate, dual-rate, and reciprocal cost allocation methods. It provides examples of allocating support department costs using different allocation rates and accounting for actual versus budgeted costs and quantities.
This document discusses methods for allocating costs across departments including single-rate, dual-rate, and reciprocal cost allocation methods. It provides examples of allocating support department costs using different allocation rates and accounting for actual versus budgeted costs and quantities.
The dual-rate method permits a more refined allocation of the power department costs; it permits the use of different allocation bases for different cost pools. The fixed costs result from decisions most likely associated with the scale of the facility, or the practical capacity level. The variable costs result from decisions most likely associated with monthly usage. ANSWER 15-17 Single-rate method, budgeted versus actual costs and quantities.
Budgeted indirect costs
1. a. Budgeted rate = = $115,000/50 trips = $2,300 per round-trip Budgeted trips
Indirect costs allocated to Dark C. Division = $2,300 per round-trip 30 budgeted round trips = $69,000
Indirect costs allocated to Milk C. Division = $2,300 per round-trip 20 budgeted round trips = $46,000 b. Budgeted rate = $2,300 per round-trip
Indirect costs allocated to Dark C. Division = $2,300 per round-trip 30 actual round trips = $69,000
Indirect costs allocated to Milk C. Division = $2,300 per round-trip 15 actual round trips = $34,500
Actual indirect costs
c. Actual rate = = $96,750/ 45 trips = $2,150 per round-trip Actual trips
Indirect costs allocated to Dark C. Division = $2,150 per round-trip 30 actual round trips = $64,500
Indirect costs allocated to Milk C. Division = $2,150 per round-trip 15 actual round trips = $32,250 15-18 Dual-rate method, budgeted versus actual costs, and practical capacity versus actual
3. An alternative ranking is based on the dollar amount of services rendered to other support departments. Using numbers from requirement 2, this approach would use the following sequence:
Step 1: Allocate Information Systems first ($19533 provided to HR).
Step 2: Allocate HR second ($16777 provided to Information Systems).
15-22 Reciprocal cost allocation (continuation of 15-21).
1. The reciprocal allocation method explicitly includes the mutual services provided among all support departments. Interdepartmental relationships are fully incorporated into the support department cost allocations.
Info. Systems Corporate Consumer Total HR Costs Incurred $72,700 $234,400 $ 998,270 $489,860 $1,795,230 Alloc. of HR costs 43,404 28,935 (21/91, 42/91, 28/91) (94,041) 21,702
Alloc. of Info. Syst. costs
(320/3,840, 1,920/3,840, 1,600/3,840) 21,341 (256,102) 128,051 106,710 _________ $ 0 $ 0 $1,169,725 $625,505 $1,795,230 Solution Exhibit 15-22 presents the reciprocal method using repeated iterations. SOLUTION EXHIBIT 15-22 Reciprocal Method of Allocating Support Department Costs for September 2012 at E-books Using Repeated Iterations
Support Departments Operating Departments
Human Information Corporate Consumer
Resources Systems Sales Sales Total
Budgeted manufacturing overhead costs
before any interdepartmental cost allocation $72,700 $234,400 $998,270 $489,860 $1,795,230
1st Allocation of HR (72,700) 16,777 33,554 22,369
of operating departments $ 0 $ 0 $1,169,725 $625,505 $1,795,230 Total accounts allocated and reallocated (the numbers in parentheses in first two columns)
HR $72,700 + $20,931 + $402 + $8 = $ 94,041
Information Systems $251,177 + $4,830 + $93 + $2 = $256,102 aBase is (21 + 42 + 28) or 91 employees b Base is (320 + 1,920 + 1,600) or 3,840 minutes
3. The reciprocal method is more accurate than the direct and step-down methods when there are reciprocal relationships among support departments.
The reciprocal method is the preferred method although, for September 2013, the numbers do not appear materially different across the alternatives. 15-27 Single-rate, dual-rate, and practical capacity allocation.
Budgeted number of gifts wrapped = 4,500
Budgeted fixed costs = $4,950 Fixed cost per gift based on budgeted volume = $4,950 ÷ 4,500 = $1.10 Average budgeted variable cost per gift = 0.35 Total cost per gift wrapped $1.45
1.a. Allocation based on budgeted usage of gift-wrapping services:
