Professional Documents
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Allocati
on
B.COM REGULAR & PRIVATE
PART 1 ACCOUNTING,
STATISTICS & ECONOMICS.
PART 2 ADVANCED & COST
ACCOUNTING, BUSINESS
LAW, AUDITING & TAX.
MA-ECONOMICS
EXTERNAL
PREVIOUS
MICRO ECONOMICS &
STATISTICS
FINAL
MACRO ECONOMICS
Learning General Framework for Cost
Objective 1 Allocation
1
Establish the details regarding
cost allocation in advance.
2
Allocate variable- and fixed-
cost pools separately.
3
Evaluate performance using budgets for
each production and service department.
Service Department Example
5-year lease
Computer Department
Business: Engineering:
210 700 = 30% 490 700 = 70%
100,000 X .3 = 30,000 100,000 X .7 = 70,000
Fixed-Cost Pool
To human resources:
(9 27) 1,260,000 = 420,000
To processing:
(15 27) 1,260,000 = 700,000
To assembly:
(3 27) 1,260,000 = 140,000
Step-Down Method
To processing:
(16 80) 660,000 = 132,000
To assembly:
(64 80) 660,000 = 528,000
Step-Down Method
Processing department
Direct Step-Down
Direct department costs 1,000,000 1,000,000
From facilities management 1,050,00 700,000
From Personnel 48,000 132,000
Total costs 2,098,000 1,832,000
Step-Down Method
Assembly department
Direct Step-Down
Direct department costs 1,600,000 1,600,000
From facilities management 210,000 140,000
From personnel 192,000 528,000
Total costs 2,002,000 2,268,000
Costs Not Related to Cost Drivers
Guidelines:
4. Allocate costs
Costs
Step 1:
Step 2:
Step 3:
Step 4:
Revenue
Total assets
Physical Relative
units sales values