COST ALLOCATION 1 Direct Method • Allocates s pport costs onl to Operating Departments support only • No Interaction between Support Departments prior to allocation 2 Direct Method 3 Step-Down Method p • Allocates support costs to other support departments and to operating departments that partially recognizes the mutual services provided among all support departments • One-Way Interaction between Support Departments prior to allocation 4 Step-Down Method 5 Reciprocal
Words: 979 - Pages: 4
Methods of Allocating Costs - Overview 1. Review the three Method of Allocating Costs. - Direct Method - Step Down Method - Reciprocal Method 2. Discuss the strengths and weaknesses of each method 3. Winery Problem – platform for discussing Joint Cost Allocations 4. Review remaining cost allocation problems. 5. Summarize and Review. State College Community Hospital State College Community Hospital has 2 Service Departments: 1. Maintenance 2. Food Services The Hospital also has three patient
Words: 1042 - Pages: 5
Cost Allocation ACC/561 April 23, 2012 Cost Allocation The purpose of cost allocation is to identify and correctly allocate costs associated with a job, product, or service. The main uses of cost allocation are to facilitate decision-making regarding costs, justify prices charged for products and services, cost control, and for optimal utilization of resources. There are several methods used for cost allocation, depending on the type of product or service offer by the company. Variable
Words: 979 - Pages: 4
5 Cost Allocation and Activity-Based Costing Systems L E A R N I N G O B J E C T I V E S After studying this chapter, you will be able to 1. Explain the major purposes for allocating costs. 2. Explain the relationship between activities, resources, costs, and cost drivers. 3. Use recommended guidelines to charge the variable and fixed costs of service departments to other organizational units. 4. Identify methods for allocating the central costs of an organization. 5. Use the direct, step-down
Words: 28659 - Pages: 115
Cost Behaviors and Allocation Health Financial Management Cost allocation is essentially a pricing process within the organization whereby managers allocate the costs of one department to other departments (Gapenski, pg 188). Because this pricing process does not occur in a market setting, no objective standard exists that establishes the price for the transferred services (Gapenski, pg 188). Cost allocation within a business must, to the extent
Words: 854 - Pages: 4
HSA 525 | Cost Behaviors and Allocation | Assignment 2 | Tomeka Lewis4/29/2012 | In today’s world of businesses and corporations, there is a common goal shared throughout every industry: increase profits. With increases in skills and developing methods, businesses have come far lengths in increasing their profits, or operating income. Controlling costs is the key to a positive operation. Executives and managerial branches are using what they know about costs to create business
Words: 894 - Pages: 4
Cost Allocation Assignment Kaneilia Williams Accounting in a Health Care Environment ACC/HC 561 April 23, 2012 Ruth E. Brown Academic and Western Hospitals Academic Hospital and Western Hospital share services as a result of a merger about a year ago. There is a parent organization that owns both hospitals and allows each to operate individual as its own profit center. Academic Hospital now handles all laboratory services for both hospitals and Western Hospital handles maternity
Words: 698 - Pages: 3
HRMT 317 Introduction Costs are linked with all types of organizations- business, nonbusiness, manufacturing, retail and service. Cost behavior, Cost accounting & allocation, and Budget- these are the three key requirements to run any business nowadays. Measuring cost behavior (cost measurement) is associated with understanding and calculating how activities of an organization affect different levels of cost. On the other hand, cost accounting is a kind of accounting method
Words: 2670 - Pages: 11
CHAPTER 16 COST ALLOCATION: JOINT PRODUCTS AND BYPRODUCTS 161 Exhibit 161 presents many examples of joint products from four different general industries. These include: Industry Separable Products at the Splitoff Point Food Processing: • Lamb • Lamb cuts, tripe, hides, bones, fat • Turkey • Breasts, wings, thighs, poultry meal Extractive: • Petroleum • Crude oil, natural gas 162 A joint cost is a cost of a production process that yields multiple products simultaneously
Words: 10875 - Pages: 44
making more profit and needs the additional space. The dialysis center should not suffer all the cost. Moving the dialysis center makes more sense because they can increase their revenue if they could take on more patients. The Outpatient Clinic increased their capacity thus should pay the costs of this consumption of the usage of 25% increase. Question 2 Yes. they should be charged the actual cost of the new facility because they are using the new facility. They were spending $300,000 allocating
Words: 341 - Pages: 2
