ch07 guan cm aise ppt

8/11/2019 Ch07 Guan Cm Aise Ppt

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COST MANAGEMENT

COPYRIGHT 2009 South-Western Publishing, a i!ision o" Cengage #earning$Cengage #earning an South-Western are trae%ar&s use herein uner li'ense$

(

Guan Hansen Mowen

Chapter 7

Allocating Costs ofSupport Departmentsand Joint Products


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Study Objectives

1. Describe the difference between support departmentsand producin departments.

2. !a"cu"ate charin rates# and distinuish betweensin"e and dua" charin rates.

$. %""ocate support center costs to producin departmentsusin the direct method# the se&uentia" method# and thereciproca" method.

'. !a"cu"ate departmenta" overhead rates.

(. )dentify the characteristics of the joint productionprocess# and a""ocate joint costs to products.


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%n Overview of !ost %""ocation

* %""ocation is dividin a poo" of costs andassinin those costs to subunits

*+he cost objects must be determined* !ost objects are usua""y departments

, -roducin creatin products so"d tocustomers

, Support provide essentia" services forproducin departments


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Departmenta"i/ationManufacturin 0irm


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Departmenta"i/ationService 0irm


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%""ocatin Support Department!osts to -roducin Departments

* Departmenta"i/e the firm

* !"assify each department as support or producin

* +race a"" overhead costs in the firm to the appropriatedepartment

* %""ocate support department costs to producindepartments

* !a"cu"ate predetermined overhead rate for producindepartments

* %""ocate overhead to units produced

Steps:


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%n Overview of !ost %""ocation


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%""ocatin One Department4s !oststo %nother Department

* +he costs of a support department areoften a""ocated throuh the use of acharging rate.

* Major factors of rate se"ection

, !hoice of sin"e or dua" rate

, 5se of budeted or actua" support departmentcosts.


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* Deve"opin a fi7ed rate, Determine budeted fi7ed costs

, !ompute a""ocation ratio,%""ocate

* Deve"opin the variab"e rate, Depends on the costs that chane as the activity

driver chanes

0i7ed costs 8 estimated variab"e costsSin"e 9rate estimated usae

Dua" rate 0i7ed rate and a variab"e rate


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;hen a""ocatin support department costs#shou"d actua" or budeted costs bea""ocateddirect8 a""ocated? based on maintenance@hours

( )'#(:: Grindin

C21:#::: 9 C1:(#:::'#(:: '#(::8

Grindin %ssemb"y

+o Grindin

Costs to allocate: $16! "irect # $! allocate" % $&1!

+o %ssemb"y( )'#(:: %ssemb"y

C21:#::: 9 C1:(#:::'#(:: '#(::8

Grindin %ssemb"y


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Se&uentia" a""ocation


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Beciproca" a""ocation


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M 9 C1:#::: 8 .2-M 9 C1:#::: 8 .2>2(:#::: 8 .1M?

M 9 C1:#::: 8 (:#::: 8 .:2M.:6M 9 C21:#:::M 9 C21'#23

5ti"i/e a series of simu"taneous "inear e&uations

- 9 C2(:#::: 8 .1-- 9 C2(:#::: 8 .1>21'#23?- 9 C2(:#::: 8 21#'26

- 9 C21#'26


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M 9 C1:#::: 8 .2-M 9 C1:#::: 8 .2>2(:#::: 8 .1M?

M 9 C1:#::: 8 (:#::: 8 .:2M.63M 9 C21:#:::M 9 C21'#23


- 9 C2(:#::: 8 .1-- 9 C2(:#::: 8 .1>21'#23?- 9 C2(:#::: 8 21#'26

- 9 C21#'26


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M 9 C1:#::: 8 .2-M 9 C1:#::: 8 .2>2(:#::: 8 .1M?

M 9 C1:#::: 8 (:#::: 8 .:2M.63M 9 C21:#:::M 9 C21'#23


- 9 C2(:#::: 8 .1-- 9 C2(:#::: 8 .1>21'#23?- 9 C2(:#::: 8 21#'26

- 9 C21#'26


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!hoosin a Support Department!ost %""ocation Method


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Departmenta" Overhead Batesand -roduct !ostin

%fter a""ocatin a"" support service costs toproducin departments# an overhead rate isca"cu"ated for each department

%""ocated -roducinservice departmentcosts overhead costs

Measure of activity

+


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Departmenta" Overhead Batesand -roduct !ostin

% product cost can now be determined

Direct materia"s

8 Direct "abor8 %ssined overhead

-roduct cost


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%ccountin for Foint-roduction -rocesses

* 'oint pro"uctsare two or more productsproduced simu"taneous"y by the sameprocess up to a sp"it@off point.

, +he sp"it@off point is the point at which the jointproducts become separate and identifiab"e.

* Separa(le costsare easi"y traced to

individua" products and offer no particu"arprob"em.


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* +he distinction between joint and by@products rests so"e"y on the re"ativeimportance of their sa"es va"ue.

* % by@product is a secondary productrecovered in the course of manufacturina primary product.

, Foint costs are not typica""y a""ocated, Sa"es revenue is c"assified as other income

, -ost@sp"it@off processin costs are deductedfrom sa"es revenue


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Foint !ost %""ocation Methods

* -hysica" 5nits Method

, -resumes that each unit of the fina" productcosts as much to produce as any other

* ;eihted %verae Method

,%pp"ies weiht factors to ref"ect differinmateria"s# comp"e7ity# time# etc.


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% sawmi"" processes "os into four rades of "umberand incurs tota" joint costs of C13#:::

Foint !ost %""ocation-hysica" 5nits Method


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% peach cannin factory purchases C(#::: of peachesand rades and cans them by &ua"ity.

Foint !ost %""ocation;eihted %verae Method


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Foint !ost %""ocation Methods

* Sales)*alue)at)Split)O++@Method,%""ocates joint cost based on each product4s

proportionate share of sa"es va"ue at sp"it@off

* Net Reali,a(le *alueMethod,%""ocates joint cost based on hypothetical market price

>eventua" marAet va"ue minus processin costs beyondsp"it@off?

* Constant Gross Margin -ercentageMethod,%""ocates joint costs such that the ross marin is the

same for each product


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% sawmi"" processes "os into four rades of "umberand incurs tota" joint costs of C13#:::

Foint !ost %""ocationSa"es@Ia"ue@at@Sp"it@Off Method


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Foint !ost %""ocationet Bea"i/ab"e Ia"ue Method

% company manufactures two products# %"pha and =eta# from ajoint process. One production run costs C(#(: and resu"ts in1#::: a""ons of %"pha and $#::: a""ons of =eta. +he separab"ecost for %"pha is C1 per a""on and for =eta is C2 per a""on.


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Foint !ost %""ocation!onstant Gross Marin Method

Determine rossmarin percentae

Foint costa""ocation


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COST MANAGEMENT

COPYRIGHT 2009 South-Western Publishing, a i!ision o" Cengage #earning$

)0

Guan Hansen Mowen

End Chapter 7

ch07 guan cm aise ppt

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