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uggestions for dispersing indirect expenditures to departments: cleaning service

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 16Q: When using the sequential distribution method of distributing service department costs, if a service...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

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Identifying basis for distribution of service department costs What would be the appropriate basis for distributing the costs of each of the following service departments to the user departments? Building maintenance Inspection and packing Machine repair Human resources Purchasing Shipping Raw materials storeroom
Suggest a reasonable basis for allocating thefollowing indirect expenses to departments: janitorial services
Suggest a reasonable basis for allocating thefollowing indirect expenses to departments: advertising
Compare and explain differences in the support-department costs allocated to eachproduction department.
When allocating service department costs to production departments, why is the standard cost that the service department was expected to incur, rather than the actual cost that was incurred, used in the allocation?
The actions listed next are associated with either an activity-based operational control system or a traditional operational control system: a. Budgeted costs for the maintenance department are compared with the actual costs of the maintenance department. b. The maintenance department manager receives a bonus for beating budget. c. The costs of resources are traced to activities and then to products. d. The purchasing department is set up as a responsibility center. e. Activities are identified and listed. f. Activities are categorized as adding or not adding value to the organization. g. A standard for a products material usage cost is set and compared against the products actual materials usage cost. h. The cost of performing an activity is tracked over time. i. The distance between moves is identified as the cause of materials handling cost. j. A purchasing agent is rewarded for buying parts below the standard price set by the company. k. The cost of the materials handling activity is reduced dramatically by redesigning the plant layout. l. An investigation is undertaken to find out why the actual labor cost for the production of 1,000 units is greater than the labor standard allowed. m. The percentage of defective units is calculated and tracked over time. n. Engineering has been given the charge to find a way to reduce setup time by 75 percent. o. The manager of the receiving department lays off two receiving clerks so that the fourth-quarter budget can be met. Required: Classify the preceding actions as belonging to either an activity-based operational control system or a traditional control system. Explain why you classified each action as you did.
What are support departments, and why are their costs allocated to other departments? What process is used to allocate support department costs?
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Should actual or budgeted service department costs be allocated? Why?
A-Using the reciprocal method, what amount of Data Center Department cost will be allocated to the Warehouse Department B-How much does budgeted cost allocated for Department Books? C-How much does budgeted cost allocated for Department Music?
Allocate the support departments’ costs to the operating departments using the direct method