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Transcript of SPPTChap011
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2014 by McGraw-Hill Education. This is proprietary material solely or authori!ed instructor use. "ot authori!ed or sale or distribution in any
manner. This document may not be copied# scanned# duplicated# orwarded# distributed# or posted on a website# in whole or part.
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PowerPoint Authors:Susan Coomer Galbreath, Ph.D., CPACharles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIACnthia J. !oone, Ph.D., CPA
Copyright 2014 by The McGraw-Hill Companies, Inc !ll rights reser"e#McGraw-Hill$Irwin
Service Department and Joint CostAllocation
Chapter 11
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11-3
Service Department CostAllocation
LO 11-1 "#$lain wh ser%i&e &osts are allo&ated.
'())*)
Service departments provide services to other departments.Service departments provide services to other departments.
For example, an information systems department is aFor example, an information systems department is a
service department that provides information systemsservice department that provides information systems
support to other departments, and a human resourcessupport to other departments, and a human resourcesdepartment provides hiring and training services to otherdepartment provides hiring and training services to other
departments.departments.
User departments use the functions of service departments.User departments use the functions of service departments.
For example, the production department uses the servicesFor example, the production department uses the services
provided by the information systems and human resourcesprovided by the information systems and human resources
departments. User departments could be other servicedepartments. User departments could be other servicedepartments or production or marketing departments thatdepartments or production or marketing departments that
produce or market the organizations products.produce or market the organizations products.
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11-4
Ser%i&e and +ser De$artments Carlle Coal Com$an
'())*)
Service Department CostAllocation
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11-5
Cost Allocation: Direct MethodLO 11-2
Allo&ate ser%i&e de$artment &osts usin- the dire&t method. Dire&t method:
Char-es &osts o/ ser%i&e de$artments to user de$artmentswithout makin- allo&ations amon- ser%i&e de$artments.
'())*0
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11-6
Cost Allocation: Step Method
LO 11-3 Allo&ate ser%i&e de$artment &osts usin- the ste$ method.
1he ste$ method allo&ates some ser%i&ede$artment &osts to other ser%i&e de$artments.
(n&e an allo&ation is made /rom a ser%i&ede$artment no /urther allo&ations are madeba&k to that ser%i&e de$artment.
Generall, allo&ate in order o/ $ro$ortion o/ser%i&es $ro%ided to other ser%i&e de$artments.
'())*2
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Cost Allocation: Step Method
Cost 3low Dia-ram: Ste$ Method Carlle Coal Com$an
'())*2
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Cost Allocation: ReciprocalMethodLO 11-4 Allo&ate ser%i&e de$artment &osts usin- the re&i$ro&al method.
1he re&i$ro&al method re&o-ni4es all ser%i&es$ro%ided b an ser%i&e de$artment, in&ludin-
ser%i&es $ro%ided to other ser%i&e de$artments.
It a&&ounts /or &ost /lows amon- ser%i&ede$artments $ro%idin- ser%i&es to ea&h other.
It re5uires a simultaneous e5uation solution.
'())*6
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Cost 3low Dia-ram: !e&i$ro&al Method Carlle Coal Com$an
'())*6
Cost Allocation: ReciprocalMethod
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1he total %ariable &ost o/ In/ormation Ser%i&es, when ou&onsider the use o/ Administration b In/ormation Ser%i&esis 7),888,888.
1he total &ost sa%in-s that would &ome /rom eliminatin-In/ormation Ser%i&es are the 7),888,888 %ariable &osts$lus an a%oidable /i#ed &osts.
'())*9
The Reciprocal Method andDecision Making
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Allocation of Joint Costs
LO 11-6 "#$lain wh oint &osts are allo&ated.
Joint &ost is the &ost o/ a manu/a&turin-$ro&ess with two or more out$uts.
'())*;
Joint Produ&ts
(ut$uts /rom a &ommon in$utand &ommon $rodu&tion $ro&ess
S$lit*(// $oint
Sta-e o/ $ro&essin- that se$aratestwo or more $rodu&ts
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Allocation of Joint Costs
Minin- &osts70
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Allocation of Joint Costs
"%aluatin- e#e&uti%e $er/orman&e
Determinin- the in%entor %alue
>et reali4able %alue method
Phsi&al 5uantities method
'())*;
'(
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Joint Cost Allocation Methods
LO 11-7 Allo&ate oint &osts usin- the net reali4able %alue method.
>et reali4able %alue method:Joint &ost allo&ation based on the $ro$ortional%alues o/ the $rodu&ts at the s$lit*o// $oint.
>et reali4able %alue ?>!@:Sales %alue o/ ea&h $rodu&t at the s$lit*o// $oint.
"stimated net reali4able %alue:Sales $ri&e o/ a /inal $rodu&t minus additional$ro&essin- &osts ne&essar to $re$area $rodu&t /or sale.
'())*