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Chapter 11 Service Department and Joint Cost Allocation McGraw­Hill/Irwin Copyright © 2011 by The McGraw­Hill Companies, Inc. All rights reserved. Service Department Cost Allocation L.O. 1 Explain why service costs are allocated. • Service Department: Department that provides services to other subunits in the organization. • User Department: Department that uses the functions of service departments. 11 - 2 Cost Allocation: Direct Method L.O. 2 Allocate service department costs using the direct method. • Direct method: Charges costs of service departments to user departments without making allocations among service departments. Service Department: Information Systems (S1) User Department: Hilltop Mine (P1) Service Department: Administration (S2) User Department: Pacific Mine (P2) 11 - 3 Cost Allocation: Step Method L.O. 3 Allocate service department costs using the step method. • The step method allocates some service department costs to other service departments. • Once an allocation is made from a service department no further allocations are made back to that service department. • Generally, allocate in order of proportion of services provided to other service departments. 11 - 4 Cost Allocation: Reciprocal Method L.O. 4 Allocate service department costs using the reciprocal method. • The reciprocal method recognizes all services provided by any service department, including services provided to other service departments. • It accounts for cost flows among service departments providing services to each other. • It requires a simultaneous equation solution. 11 - 5 ... - tailieumienphi.vn
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