Support Department Cost Allocation—Reciprocal Services Method Blue Africa Inc. produces laptops and desktop computers. The company’s production activities mainly occur in what the company calls its Laser and Forming departments. The Cafeteria and Security departments support the company’s production activities and allocate costs based on the number of employees and square feet, respectively. The total cost of the Security Department is $253,000. The total cost of the Cafeteria Department is $283,000. The number of employees and the square footage in each department are as follows: Employees Square Feet Security Department 10 560 Cafeteria Department 18 2,400 Laser Department 40 2,400 Forming Department 50 3,200 Using the reciprocal services method of support department cost allocation, determine the total costs from the Security Department that should be allocated to the Cafeteria Department and to each of the production departments. CafeteriaDepartment LaserDepartment FormingDepartment Security Department cost allocation $ $ $
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Support Department Cost Allocation—Reciprocal Services Method
Blue Africa Inc. produces laptops and desktop computers. The company’s production activities mainly occur in what the company calls its Laser and Forming departments. The Cafeteria and Security departments support the company’s production activities and allocate costs based on the number of employees and square feet, respectively. The total cost of the Security Department is $253,000. The total cost of the Cafeteria Department is $283,000. The number of employees and the square footage in each department are as follows:
| Employees | Square Feet | |||
| Security Department | 10 | 560 | ||
| Cafeteria Department | 18 | 2,400 | ||
| Laser Department | 40 | 2,400 | ||
| Forming Department | 50 | 3,200 |
Using the reciprocal services method of support department cost allocation, determine the total costs from the Security Department that should be allocated to the Cafeteria Department and to each of the production departments.
| Cafeteria Department |
Laser Department |
Forming Department |
|||
| Security Department cost allocation | $ | $ | $ |
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