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MANAGEMENT
PowerPoint Presentation by ACCOUNTING
Gail B. Wright
Professor Emeritus of Accounting 8th EDITION
Bryant University
BY
© Copyright 2007 Thomson South-Western, a part of The
Thomson Corporation. Thomson, the Star Logo, and
South-Western are trademarks used herein under license.
HANSEN & MOWEN
7 SUPPORT-DEPARTMENT COST
ALLOCATION
1
LEARNING OBJECTIVES
1. Describe the difference between support
departments and producing departments.
2. Calculate single & multiple charging rates
for a support department.
3. Allocate support-department costs to
producing departments using the direct,
sequential, & reciprocal methods.
Continued
2
LEARNING OBJECTIVES
4. Compute departmental overhead rates.
5. Describe the allocation of joint costs to
products. (Appendix).
3
LO 1
ALLOCATION: Definition
4
LO 1
COST ALLOCATION
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LO 1
6
LO 1
7
LO 1
8
LO 1
9
LO 1
COMPETITIVE PRICING
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LO 2
11
LO 7
PHOTOCOPYING DEPT.:
Barry & Hamilton
12
LO 2
Allocating charges:
# Actual Pages x Charging rate
= Allocated charges
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LO 2
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LO 2
15
LO 2
Peak usage =
Average usage Audit + MAS 16875
Peak usage, Tax 22,500
Peak usage 39,375
Allocating charges:
Fixed costs = Proportion Peak x Fixed Cost
Variable costs = Estimated Variable cost x
Actual page usage
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LO 2
17
LO 2
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LO 3
ALLOCATION METHODS:
Multiple Service Departments
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LO 3
EXHIBIT 7-8 20
LO 3
EXHIBIT 7-8 21
LO 3
EXHIBIT 7-10
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LO 3
EXHIBIT 7.10
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LO 3
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LO 4
COSTING PROCESS
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LO 5
THE END
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