Service Department Cost Allocation - Anna Lee

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LO3Cost Allocation: Step MethodService Department Cost AllocationToFrom(S1)(S2)(P1)(P2)TotalDept. costs(S1)(S2)$800,000(800,000)-0-$ -0-$5,000,000400,000 f(5,400,000)$ -0-Note: Under Step method, S1 costs does allocate to S2.f50.0% × $800,000g10.0% × $800,000h40.0% × $800,000I62.5% × $5,400,000j37.5% × $5,400,000k$5,800,000 of service department costs wereultimately allocated to production departments.$ -0-80,000 g3,375,000 i$3,455,000$ -0-320,000 h2,025,000 j$2,345,000$5,800,000 k$5,800,000 k11 - 10
Cost Allocation: Reciprocal Method• The reciprocal method recognizes all servicesprovided by any service department, includingservices provided to other service departments.• It accounts for cost flows among servicedepartments providing services to each other.• It requires a simultaneous equation solution.11 - 11
Page 2: LO1Service Department Cost Allocati
Page 5 and 6: Cost Allocation: Direct Method• D
Page 7 and 8: Cost Allocation: Step Method• The
Page 9: LO3Cost Allocation: Step MethodServ
Page 13 and 14: LO4Cost Allocation: Reciprocal Meth
Page 19 and 20: LO5The Reciprocal Methodand Decisio
Page 21 and 22: Allocation of Joint CostsJoint cost
Page 23 and 24: Net Realizable Value MethodFinal sa
Page 25 and 26: Estimating NRV• When no sales val
Page 27 and 28: Physical Quantities Method• Joint
Page 29 and 30: By-products• By-products are outp
Page 31 and 32: Carlyle Coal CompanyFor the Month o
Page 33 and 34: Sell or Process Further• Suppose

Service Department Cost Allocation - Anna Lee

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