Summary Chapter 15: Allocation of Support Departments

Allocation of Support-Department Costs, Single-Rate and Dual-Rate Methods
Common Costs and Revenue
Single Dual
Operating department: an operating department also called
a production department, directly adds value to a product or Rate Rate
service
Supporting department: A support department, also called a
service department, provides the services that assist other
allocates
internal departments (operating departments and other costs in each cost pool (support
allocates each pool using a
support departments) in the company. department in this section) to
cost objects (operating divisions different cost-allocation
in this section) using the same base
rate per unit of a single
Overview allocation base



Direct
Method
partitions the cost of each
does not distinguish between support department into two
fixed and variable costs pools, a variablecost
Single-Rate Step down pool and a fixed-cost pool

Method Method

Dual-Rate Peciprocal
Methods
Method Method

Common
Costs  Managers can allocate support-department costs to
operating divisions based on either a budgeted rate or
the eventual actual cost rate
Mthods of Allocating Support Costs to Production Departments

Difference Single and Dual Method: distinction made between
separate fixed and variable costs or not
Direct/ Step-down & Reciprocal Method: allocates support
costs to other support departments