Chapter 15
This presentation is the property of its rightful owner.
Sponsored Links
1 / 7

Prepared by Diane Tanner University of North Florida PowerPoint PPT Presentation


  • 51 Views
  • Uploaded on
  • Presentation posted in: General

Chapter 15. Support Cost Allocation. Prepared by Diane Tanner University of North Florida. Why Allocate Support Department Costs?. Without services provided, a manufacturing facility could not function. Examples of services costs to be allocated Payroll Maintenance HR

Download Presentation

Prepared by Diane Tanner University of North Florida

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Prepared by diane tanner university of north florida

Chapter 15

Support Cost Allocation

Prepared by

Diane Tanner

University of North Florida


Why allocate support department costs

Why Allocate Support Department Costs?

  • Without services provided, a manufacturing facility could not function.

  • Examples of services costs to be allocated

    • Payroll

    • Maintenance

    • HR

    • Accounting services

    • Information technology

    • Housekeeping


Actual vs budget

Actual Vs Budget

  • Service department costs allocation bases

    • Actual rates

      • Ensure that all service department costs are allocated.

    • Budgeted rates

      • Provide service department managers incentives to control costs

      • Provide user departments more accurate information about service department billing rates for planning purposes

  • In either case, allocate using an allocation base that reflects a cause-and-effect relationship


Operating vs service departments

Operating Vs. Service Departments

  • Operating (user) departments

    • Add value to products or services

    • Also called production departments

    • Examples

      • Assembly, machining, particular sales units, geographical units, testing

  • Service (support) departments

    • Provides support and assists operating departments and other service departments

    • Examples

      • Maintenance, IT, accounting, payroll, HR, housekeeping


The big picture

The Big Picture

1. Allocate to Cost Pools

2. Allocate to Cost Objects


Methods of allocating costs of multiple support departments

Methods of Allocating Costs of Multiple Support Departments

  • Direct method

    • Allocates support department costs to operating departments only

  • Step-down method

    • Allocates support department costs to ‘some’ service departments and to operating departments

    • Partially recognizes the mutual services provided among all service departments

  • Reciprocal method

    • Allocates support department costs to all service and operating departments

    • Fully recognizes the mutual services provided among all services departments


Prepared by diane tanner university of north florida

The End


  • Login