mahm8e_chapter07.ab.az.ppt

8/16/2019 MAHM8e_Chapter07.ab.az.ppt

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PowerPointPowerPoint Presentation byPresentation by

Gail B. WrightGail B. WrightProfessor Emeritus of AccountingProfessor Emeritus of Accounting

Bryant UniversityBryant University

© Copyright !!" #homson $outh%Western& a part of #he

#homson Corporation. #homson& the $tar 'ogo& an(

$outh%Western are tra(emar)s use( herein un(er license.

MANAGEMENT

ACCOUNTING

8th EDITION

BY

HANSEN & MOWEN

" $UPP*+#%,EPA+#-E# C*$#A''*CA#/*

STUDENT EDITION


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1. Describe the difference between support

departments and producing departments.

2. Calculate single & multiple charging ratesfor a support department.

3. Allocate support-department costs to

producing departments using the direct,sequential, & reciprocal methods.

LEARNING OBJECTIVES

Continued


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. Compute departmental o!erhead rates.

". Describe the allocation of #oint costs to

products. (Appendix).

LEARNING OBJECTIVES


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A''*CA#/*0 ,efinition

A means of di!iding a pool of

costs & assigning it to !arious

subunits.

$% 1


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C*$# A''*CA#/*

hile cost allocation does not affecttotal product cost, it will affect pricing & profitabilit' of indi!idual products depending on methodused.

hile cost allocation does not affecttotal product cost, it will affect pricing & profitabilit' of indi!idual products depending on methodused.

$% 1

Price & Profitabil

it


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C*--* C*$#$0 ,efinition

(utuall' beneficial costs whichoccur when the same resource is

used in output of 2 or more

ser!ices or products.

$% 1


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)ow are o!erhead costs treated

for producing & supportdepartments*

%nce producing & support

departments are identified,

o!erhead costs are traced, notallocated to each department.

$% 1

trace!" #otallocate!


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CAU$A' 1AC#*+$0 ,efinition

Acti!ities within a producingdepartment that pro!o+e the

incurrence of support ser!ice

costs.

$% 1


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)ow are costs allocated from

departments to products*

irst, support department costs

are assigned to producing

departments. hen o!erhead

rates are de!eloped to cost products.

$% 1


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C*-PE#/#/2E P+/C/G

equires understanding costs

%!erstating leads to loss of business

/nderstating produces losses

$eads to e!aluating product or ser!ice mi0

Dropping some ser!ices

eallocating resources

epricing

$% 1


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hat +inds of charging rates

are used*

Companies use either a $i#%le

charging rate or 'lti(le

charging rates.

$% 2


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P3*#*C*P4/G ,EP#.0

Barry 5 3amilton

$%

Ser)ice !e(arte#t '$a%e

Audit department ,"

a0 department 4,"

(A5 department 16,

otal 2,

Co$t$

i0ed 7 24,1

8stimated !ariable 4,21


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1*+-U'A$0 $ingle Charging +ate

Charging rate =

Total estimated costs / Estimated usage

$ 32,!! / 2"!,!!! = $!.#2 per page

$% 2

Allocati#% char%e$*

+ Act'al Pa%e$ x Char%i#% rate

, Allocate! char%e$


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C3A+GE A''*CA#/*0 $ingleCharging +ate

De(t

Act'al

+ Pa%e$

Char%e-ate

TotalChar%e$

Audit 2, 7 .12 7 11,

a0 4", .12 ,6

(A5 11", .12 13,6

otal 22, 7 32,4

$% 2


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hat do 'ou need to +now to

use multiple charging rates*

(ultiple charging rates require

that causal factors are +nown.

$% 2

ca'$al factor$


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1*+-U'A$0 -ultiple Charging +ates

ea% usage =

A&erage usage Audit ' A #*+"

ea% usage, Tax 22,!!

ea% usage 3-,3"

$% 2

Allocati#% char%e$*

.i/e! co$t$ , Pro(ortio# Pea0 / .i/e! Co$t

1ariable co$t$ , E$tiate! 1ariable co$t x

Act'al (a%e '$a%e

$% 2


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hat are the uses of b'!%ete!

co$t$*

B'!%ete! co$t$ are used 19 to

help determine o!erhead rate

and 29 for ser!ice department

performance e!aluation.

$% 2

hel( !eteri#e o)erhea! rate

$% 2


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Act'al co$t$ should be used for

perormance e&aluation.

B'!%ete! co$t$ should be used

for product costing .

$% 2

hen should actual & budgeted costs be used*

Act'al co$t$

B'!%ete! co$t$

$% 3


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A''*CA#/* -E#3*,$0 -ultiple $ervice ,epartments

Direct allocation method

Allocate support department costs onl' to

producing departments

5equential allocation method

Allocate support department costs in step-down

approacheciprocal allocation method

$% 3

$% 3


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A''*CA#/*0 ,irect -etho( $tep 6

$% 3

De!elop allocation

ratios for support

department costs.

E73/B/#E73/B/# "%8"%8

$% 3


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A''*CA#/*0 ,irect -etho( $tep

$% 3

E73/B/#E73/B/# "%8"%8

:rorate support

department costs to

producing depts.

$% 3


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A''*CA#/*0 $e9uential -etho($tep 6

$% 3

E73/B/#E73/B/# "%6!"%6!

Allocate support depts.

costs to other

departments in order of

ran+ings.

$% 3


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A''*CA#/*0 $e9uential -etho($tep

$% 3

E73/B/#E73/B/# ".6!".6!

Allocate support depts.

costs to other

departments in order of

ran+ings.

$% 3


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1*+-U'A$0 -ultiple Charging +ates

Allocate each supporting departments costs to

all other departments 0eore allocating

supporting departments costs to producing

departments.

$% 3

Allocati#% Po2er & Mai#te#a#ce char%e$*

P , Direct co$t$ 3 Share of M4 co$t$

M , Direct co$t$ 3 Share of P4 co$t$

$%


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C*$#/G P+*CE$$

$%

)as following steps

;dentif' supporting and producing

departmentsAllocate supporting department costs to

producing departments

Allocate o!erhead to producing departmentsat predetermined rates

$% "


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ACC*U#/G 1*+ :*/#

P+*,UC# C*$#$

$% "

3 methods

Ph$ical '#it$< #oint costs distributed on basis of

ph'sical units

Sale$5)al'e5at5$(lit5off < #oint costs distributed on

basis of sales !alue at split-off

Net reali6able )al'e< #oint costs distributed on

basis of h'pothetical sales !alueB5(ro!'ct$< because insignificant sales !alue,

no #oint cost allocation


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THE ENDTHE END

CHAPTE- 7

mahm8e_chapter07.ab.az.ppt

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