What is the first step in allocating support department costs to producing departments?
Support Department Cost Allocation Learning Objectives Show
2. ASSIGNING DEPARTMENT COSTS TO PRODUCING DEPARTMENTS
3. CHOOSING A SUPPORT DEPARTMENT COST ALLOCATION METHOD
4. DEPARTMENTAL OVERHEAD RATES AND PRODUCT COSTING
The flow of costs could be diagramed as follows:
What process is used to allocate support department costs?There are three methods of allocating support department costs: the direct, step-down and reciprocal. The key differences among the methods are the assumptions as to how services provided by one support department are allocated to other support departments.
What are the steps in the cost allocation process?Basic Steps of Cost Allocation. Identify shared facilities or support services.. Identify the costs to be allocated.. Determine the allocation factors/methodology to distribute the costs equitably.. Allocate the costs.. Update and monitor the data and methodology to ensure the allocation remains fair and equitable over time.. Why are the support department costs allocated to the production departments?To provide more accurate product cost information. Allocating service department costs to production departments, and then to products, recognizes that these services constitute an input in the production process. To improve decisions about resource utilization.
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