Transcript Libby, Libby and Short - Komputer Akuntansi Perpajakan

Support
Department
Cost
Allocation
Prepared by
Douglas Cloud
Pepperdine University
6-1
Objectives
1. Describe theAfter
difference
between
studying
this support
departmentschapter,
and producing
departments.
you should
2. Explain five reasons
whyto:support cost may be
be able
assigned to producing departments.
3. Calculate charging rates, and distinguish
between single and dual charging rates.
4. Allocate support center costs to producing
departments using the direct method, the
sequential method,Continued
and the reciprocal method.
6-2
Objectives
5. Calculate departmental overhead rates.
6-3
Types of Departments
Producing
departments are
directly responsible for
creating the products or
services sold to
customers.
6-4
Types of Departments
Supporting
departments provide
essential support
services for producing
departments.
Maintenance, grounds,
engineering, personnel,
storage
6-5
Examples of Departmentalization for a
Manufacturing Firm
Production Departments
Assembly:
Supervisors’ salaries
Small tools
Indirect materials
Depreciation on machinery
Finishing:
Sandpaper
Depreciation on sanders
Support Departments
Materials Storeroom:
Clerk’s salary
Depreciation on forklift
Cafeteria:
Food
Cooks’ salaries
Depreciation on stores
Maintenance:
Janitors’ salaries
Cleaning supplies
Machine oil and lubricants
6-6
Steps in Allocating Support Department
Costs to Producing Departments
1. Departmentalize the firm.
2. Classify each department as a support
department or a producing department.
3. Trace all overhead costs in the firm to a
support department or producing
department.
4. Allocate support department costs to the
producing departments.
Continued
6-7
Steps in Allocating Support Department
Costs to Producing Departments
5. Calculate predetermined overhead rates
for producing departments.
6. Allocate overhead costs to the units of
individual products through
predetermined overhead rates.
6-8
Examples of Cost Drivers for
Support Departments
Support Department
Possible Driver
Accounting
Number of transactions
Cafeteria
Number of employees
Engineering
Number of change orders
Maintenance
Machine hours; maintenance
hours
Payroll
Number of employees
Personnel
Number of employees, firings,
layoffs, new hires
6-9
Objectives of Allocation*
 To obtain a mutually agreeable price
 To compute product-line profitability
 To predict the economic effects of planning and
control
 To value inventory
 To motivate managers
*As identified by the IMA
6-10
Hamish
and
Barton
Fixed costs……………… $26,190
Variable costs….. $0.023 per page
6-11
A Single Charge Rate
 Estimated usage in pages by the three producing
departments is as follows:
 Audit Department
 Tax Department
 MAS Department

Total
Hamish
and
Barton
Variable cost: 270,000 x $0.023
Fixed cost
Total cost for 270,000 pages
Average cost ($32,400 ÷ 270,000)
94,500
67,500
108,000
270,000
$ 6,210
26,190
$32,400
$0.12 per page
6-12
A Single Charge Rate
Total Photocopying Department Charge
Number
Charge
Total
x
=
of Pages
per Page
Charge
Audit Department
92,000
$0.12
$11,040
Tax Department
65,000
0.12
7,800
MAS Department
115,000
0.12
13,800
Total
272,000
$32,640
6-13
Dual Charging Rate
The allocation of fixed costs follow a three-step
procedure:
1) Determination of budgeted fixed support
service costs
2) Computation of the allocation ratio
Allocation ratio =
Producing department capacity
Total capacity
Continued
6-14
Dual Charging Rate
3) Allocation
Allocation = Allocation ratio x Budgeted fixed
support service costs
6-15
Dual Charging Rate
Audit
Tax
MAS
Total
Original
Number
of Copies
94,500
Percent
35%
Budgeted
Fixed Cost
Allocated
Fixed
Cost
$26,190
$ 9,167
67,500
25
26,190
6,548
108,000
40
26,190
10,476
270,000
100%
$26,191
6-16
Dual Charging Rate
Developing a Variable Rate
Audit
Tax
MAS
Total
Actual
Total
Variable Variable
Fixed
Number
of Copies x Rate = Amount + Amount = Charge
92,000
$0.023
$2,116
$ 9,167
$11,283
65,000
0.023
1,495
6,548
8,043
115,000
0.023
2,645
10,476
13,121
$6,256
$26,191
$32,447
272,000
6-17
Hamish
and
Barton
The adjusted cost allocation ratios
and allocated fixed cost based on
the newly budgeted usage
Number
of Copies
Percent
Allocated
Fixed Cost
Audit
94,500
41.1 %
Tax
67,500
29.3
7,674
MAS
68,000
29,6
7,752
230,000
100.0 %
Total
$10,764
$26,190
6-18
Choosing A Support
Department Cost Allocation
Method
The three methods for allocating support department
costs to producing departments are:
The
Direct Method
The Sequential Method
The Reciprocal Method
6-19
Direct Method of Allocation
Power
Support Departments
Grinding
Maintenance
Assembly
Producing Departments
6-20
Direct Method of Allocation
Power
Support Departments
Grinding
Maintenance
Assembly
Producing Departments
6-21
Data for Illustrating Allocation Methods
Support Departments Producing Departments
Power
Direct Costs*
$250,000
Maint.
Grinding
$160,000 $100,000
Assembly
$ 60,000
Normal Activity:
Kilowatt hours
Maintenance hours
-----
200,000
600,000
200,000
1,000
-----
4,500
4,500
*For a producing department, direct costs refer only to overhead
costs that are directly traceable to the department.
6-22
STEP 1—CALCULATE ALLOCATION RATIOS
Grinding
600,000
Power =
(600,000 + 200,000)
0.75
200,000
(600,000 + 200,000)
Maintenance =
4,500
(4,500 + 4,500)
4,500
(4,500 + 4,500)
Assembly
0.25
0.50
0.50
Direct Method
6-23
STEP 2—ALLOCATE SUPPORT DEPARTMENT
COSTS USING THE ALLOCATION RATIOS
Support Departments Producing Departments
Power Maintenance Grinding Assembly
Direct costs
$250,000
$160,000
Power a
-250,000
---
187,500
62,500
---
-160,000
80,000
80,000
Maintenance b
$
0
$
0
$100,000 $ 60,000
$367,500 $202,500
a
0.75 x $250,000 = $187,500; 0.25 x $250,000 = $62,500
b
0.50 x $160,000 = $80,000
Direct Method
6-24
Sequential Method of Allocation
STEP 1: Rank service departments
1
Maintenance
2
Grinding
3
Assembly
6-25
Sequential Method of Allocation
STEP 2
Power
Maintenance
Grinding
Assembly
6-26
Sequential Method of Allocation
STEP 2
Maintenance
Grinding
Assembly
6-27
STEP 1—CALCULATE ALLOCATION RATIOS
Maint. Grinding Assembly
200,000
Power =
(200,000 + 600,000 +
200,000)
600,000
(200,000 + 600,000 +
200,000)
0.20
0.60
Sequential Method
6-28
STEP 1—CALCULATE ALLOCATION RATIOS
Maint. Grinding Assembly
Mainte- =
nance
4,500
(4,500 + 4,500)
4,500
(4,500 + 4,500)
0.50
0.50
Sequential Method
6-29
STEP 2—ALLOCATE SUPPORT DEPARTMENT
COSTS USING THE ALLOCATION RATIOS
Support Departments Producing Departments
Power Maintenance Grinding Assembly
Direct costs
$250,000
$160,000
Power a
-250,000
50,000
150,000
50,000
---
-210,000
105,000
105,000
Maintenance b
$
0
$
0
$100,000 $ 60,000
$355,000 $215,000
a
0.20 x $250,000 = $50,000; 0.60 x $250,000 = $150,000;
0.20 x $250,000 = $50,000
b
0.50 x $210,000 = $105,000
Sequential Method
6-30
The reciprocal method
of allocation recognizes
all interactions among
support departments.
6-31
Reciprocal Method
Support Departments Producing Departments
Power Maintenance
Direct costs:
Fixed
Variable
Total
$200,000 $100,000
50,000
60,000
$250,000 $160,000
Grinding Assembly
$ 80,000
20,000
$100,000
$50,000
10,000
$60,000
Proportion of Output Used by Departments
Power Maintenance Grinding Assembly
Allocation ratios:
Power
Maintenance
--0.10
0.20
---
0.60
0.45
0.20
0.45
6-32
M = Direct costs + Share of Power’s costs
M = $160,000 + 0.2P (Power’s cost equation)
M = $160,000 + $50,000 + 0.02M
0.98M = $210,000
M = $214,286
6-33
P = Direct cost + Share of Maintenance’s cost
P = $250,000 + 0.1M (Maintenance cost equation)
P = $250,000 + 0.1($214,286)
P = $250,000 + $21,429
P = $271,429
6-34
Reciprocal Method
Total Cost
Power
Maintenance
Total
$271,429
214,286
Allocated to
Grinding
Assembly
$162,857
96,429
$259,286
.60 x $271,429
.45 x $214,286
$ 54,286
96,429
$150,715
.20 x $271,429
.45 x $214,286
6-35
Comparison of Support Department Cost
Allocations Using the Direct, Sequential, and
Reciprocal Methods
Direct costs
Allocated from Power
Allocated from Maintenance
Total cost
Direct Method
Grinding Assembly
$100,000 $ 60,000
187,500
62,500
80,000
80,000
$367,500
$202,500
6-36
Comparison of Support Department Cost
Allocations Using the Direct, Sequential, and
Reciprocal Methods
Direct costs
Sequential Method
Grinding Assembly
$100,000 $ 60,000
Allocated from Power
150,000
50,000
Allocated from Maintenance
105,000
105,000
$355,000
$215,000
Total cost
6-37
Comparison of Support Department Cost
Allocations Using the Direct, Sequential, and
Reciprocal Methods
Direct costs
Allocated from Power
Allocated from Maintenance
Total cost
Reciprocal Method
Grinding Assembly
$100,000 $ 60,000
162,857
54,285
96,429
96,429
$359,286
$210,714
6-38
Departmental Overhead Rates
The overhead rate for the Grinding Department is computed
as follows (assuming the normal level of activity is 71,000
MH):
OH rate = $355,000  71,000 = $5 per MH
The overhead rate for the assembly department is computed
as follows (assuming the normal level of activity is 107,500
DLH):
OH rate = $215,000  107,500 = $2 per DLH
6-39
End of
Chapter
6-40
6-41