Lecture 4.pdf - AF 3112 MANAGEMENT ACCOUNTING 2 Week 4 Chapter 15 Allocation of Support Department Costs Common Costs and Revenues Learning Objectives(1

Lecture 4.pdf - AF 3112 MANAGEMENT ACCOUNTING 2 Week 4...

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Chapter 15 Allocation of Support- Department Costs, Common Costs, and Revenues
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Learning Objectives (1 of 2) 15.1 Distinguish the single-rate method from the dual-rate method 15.2 Understand how the choice between allocation based on budgeted and actual rates and between budgeted and actual usage can affect the incentives of division managers 15.3 Allocate multiple support-department costs using the direct method, the step-down method and the reciprocal method 15.4 Allocate common costs using the stand-alone method and the incremental method
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Learning Objectives (2 of 2) 15.5 Explain the importance of explicit agreement between contracting parties when the reimbursement amount is based on costs incurred 15.6 Understand how bundling of products causes revenue allocation issues and the methods managers use to allocate revenues
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Allocating Support Department Costs Using the Single-rate and Dual-rate Methods (1of 2) How a company allocates its overhead and internal support costs—costs related to marketing, advertising, and other internal services—among its various production departments or projects can have a big impact on how profitable those departments or projects are. Operating (production) department—directly adds value to a product or service. Support (service) department—provides the services that assist other internal departments (operating departments and other support departments) in the company.
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Allocating Support Department Costs Using the Single-rate and Dual-rate Methods (2 of 2) Managers face two questions when allocating the costs of a support department to operating departments or divisions: 1.Should fixed costs of support departments be allocated to operating divisions? 2.If fixed costs are allocated, should variable and fixed costs of the support department be allocated in the same way?
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1. Budgeted overhead rate and budgeted hours 2. Budgeted overhead rate and actual hours 3. Actual overhead rate and actual hours When using either method, managers can allocate support-department costs to operating divisions based
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  • Spring '16
  • departments, Support- Department Costs

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