12 May Due date is tomorrow Thursday January 7, 2015 at 22:30 hours.
Due date is tomorrow Thursday January 7, 2015 at 22:30 hours.
| 5-1 Discussions: Cost Allocation Methods: When to Use Which? |
You have read about the methods for allocating support costs to supporting departments. Offer at least two example scenarios, including calculations, where these would be appropriately used, and explain why you chose those scenarios.
In your response posts, comment on your peers’ examples and calculations of the methods used to allocate support costs to supporting departments. Explain whether you would allocate support costs using a different method, given the examples, and support your responses to classmates with sound arguments. |
Here down is an example, but I don’t need that much. One or two well elaborated page will be enough.
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There are 3 methods for allocating support costs to supporting departments. There is the direct method which allocates each support department’s costs to operating departments only, the step-down method, also known as the sequential allocation method, which allocates support-department costs to other support departments and to operating departments in a sequential manner that partially recognizes the mutual services provided among all support departments, and the reciprocal method which allocates support department costs to operating departments by fully recognizing the mutual services provided among all support departments. This method fully incorporates interdepartmental relationships into the support-department cost allocations. (pg 550-553)
My first scenario is of a pet-sitting business. The supporting departments are advertising and car maintenance. The operations departments are pet walking visits and overnight visits. The advertising costs will be allocated based on the budgeted number of visits for each operations departments, while the car maintenance will be allocated based on the budgeted mileage for each operations departments. For this scenario, we will use the direct method.
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