sol15 - CHAPTER 15 ALLOCATION OF SUPPORT-DEPARTMENT COSTS,...

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Unformatted text preview: CHAPTER 15 ALLOCATION OF SUPPORT-DEPARTMENT COSTS, COMMON COSTS, AND REVENUES 15-16 (20 min.) Single-rate versus dual-rate methods, support department. Bases available (kilowatt hours): Rockford Peoria Hammond Kankakee Total Practical capacity Expected monthly usage 10,000 8,000 20,000 9,000 12,000 7,000 8,000 6,000 50,000 30,000 1a. Single-rate method based on practical capacity: Total costs in pool = $6,000 + $9,000 = $15,000 Practical capacity = 50,000 kilowatt hours Allocation rate = $15,000 50,000 = $0.30 per hour of capacity Rockford Peoria Hammond Kankakee Total Practical capacity in hours Costs allocated at $0.30 per hour 10,000 $3,000 20,000 $6,000 12,000 $3,600 8,000 $2,400 50,000 $15,000 1b. Single-rate method based on expected monthly usage: Total costs in pool = $6,000 + $9,000 = $15,000 Expected usage = 30,000 kilowatt hours Allocation rate = $15,000 30,000 = $0.50 per hour of expected usage Rockford Peoria Hammond Kankakee Total Expected monthly usage in hours Costs allocated at $0.50 per hour 8,000 $4,000 9,000 $4,500 7,000 $3,500 6,000 $3,000 30,000 $15,000 2. Variable-Cost Pool: Total costs in pool = $6,000 Expected usage = 30,000 kilowatt hours Allocation rate = $6,000 30,000 = $0.20 per hour of expected usage Fixed-Cost Pool: Total costs in pool = $9,000 Practical capacity = 50,000 kilowatt hours Allocation rate = $9,000 50,000 = $0.18 per hour of capacity Rockford Peoria Hammond Kankakee Total Variable-cost pool $0.20 8,000; 9,000; 7,000, 6,000 Fixed-cost pool $0.18 10,000; 20,000; 12,000, 8,000 Total $1,600 1,800 $3,400 $1,800 3,600 $5,400 $1,400 2,160 $3,560 $1,200 1,440 $2,640 $ 6,000 9,000 $15,000 The dual-rate method permits a more refined allocation of the power department costs; it permits the use of different allocation bases for different cost pools. The fixed costs result from decisions most likely associated with the scale of the facility, or the practical capacity level. The variable costs result from decisions most likely associated with monthly usage. 15-1 15-21 (40 min.) Direct and step-down allocation. 1. Support Departments Operating Departments HR Info. Systems Corporate Consumer Total Costs Incurred $72,700 $234,400 $ 998,270 $489,860 $1,795,230 Alloc. of HR costs (42/70, 28/70) (72,700) 43,620 29,080 Alloc. of Info. Syst. costs (1,920/3,520, 1,600/3,520) ______ (234,400 ) 127,855 106,545 ________ $ $ $1,169,745 $625,485 $1,795,230 2. Rank on percentage of services rendered to other support departments. Step 1: HR provides 23.077% of its services to information systems: 21 28 42 21 + + = 91 21 = 23.077% This 23.077% of $72,700 HR department costs is $16,777. Step 2: Information systems provides 8.333% of its services to HR: 320 600 , 1 920 , 1 320 + + = 840 , 3 320 = 8.333% This 8.333% of $234,400 information systems department costs is $19,533....
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This note was uploaded on 09/13/2011 for the course ACCT 305 taught by Professor Franz during the Spring '07 term at S.F. State.

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sol15 - CHAPTER 15 ALLOCATION OF SUPPORT-DEPARTMENT COSTS,...

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