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Ch 15 support-department costs, common costs, and revenue (common cost…
Ch 15 support-department costs, common costs, and revenue
common cost
incremental cost
rank the party and allocate full cost to primary party and remaining to incremental party
Shapley value method
average of case as primary party and incremental party
stand-alone cost
weighted based on stand-alone price
bundled products and revenue
stand-alone revenue
unit cost: weighted based on manufacturing cost per unit
physical unit: same weighted
selling price: weighted based on stand-alone selling price
incremental revenue
primary product: full
first-incremental product = bundle price - primary price = two-bundle price - primary price
second-incremental product = bundle price - primary - first incremental
shapley value method
average of revenue allocated as primary and first incremental prodcuts
support department cost
multiple support department
step-down method
allocate support-department cost to other support department and then to operating departments
reciprocal method
EPC = 300,000 + 0.1MM
MM = 264,000 + 0.3EPC
direct method
allocate support department cost only to operating department
allocating support department cost
allocation based on demand
single rate
budget rate = budgeted total cost / budgeted usage
cost allocation: budget rate * actual usage
dual rate
budget rate = budget fixed cost / budget usage
cost allocation
fixed cost: budget rate * budget usage
variable cost: budget rate * actual usage
allocation based on supply of capacity
single rate
budget rate = (budget fixed cost / practical capacity) + budget vc rate
cost allocation
budget rate * actual usage
fixed cost of unused capacity: budget fixed cost rate * (practical -actual)
dual rate
budget rate = (budget fixed cost / practical capacity) + budget vc rate
cost allocation
fixed cost: budget rate * budget usage
variable cost: budget rate * actual usage
fixed cost of unused capacity: budget fixed cost rate * (practical -actual)