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Allocating Costs of Multiple Support Departments Homework Help by Myhomeworkhelp.Com
All students hoping for a bright career in economics have to attain expertise in costing and budgeting rules. Allocation of cost of service departments is a major area of study.
Need for cost allocation
Cost allocation means allotting cost to specific products. It is easy to allocate production costs, but overhead charges are more difficult to divide. A basic idea about this will help in myhomeworkhelp.com allocating costs of multiple support departments homework help.
- Overhead expenses have to be properly segregated so that cost of producing each product can be found out.
- Cost allocation helps in better control over costs.
- If not allocated, some costs may be neglected resulting in their increase.
What are multiple support departments?
The cost of service departments needs to be allotted to production departments as these costs are not directly involved in production. There are some departments which offer support to many other sections. The entire company will be deriving benefits of its functioning. These are called multiple support departments. Students look for allocating costs of multiple support departments assignment help as they are unsure of its meaning. In case of multiple serving sections, allocating cost becomes difficult.
Some examples are cafeteria, health clinic, and janitorial services.
Methods of allocating costs of support departments
Efficient allocation of cost of service sections to production sections is a prerequisite for good management. Students searching for allocating costs of multiple support departments homework help should familiarize themselves with these. There are two methods to allocate cost.
- Direct method:
In this method, service section cost is directly charged to production department. If it supports only one product, there is no confusion. But for servicing sections like cafeteria which assists all other sections, costs are allocated on some logical basis. Cafeteria costs can be allotted based on a number of employees in a section.
- Step method:
In this method, service department overheads are allocated to other service sections that they serve. Then these costs are charged to production together with charges of the other section. For example, suppose a company has legal section to support finance department. Then cost of legal charges is allocated to finance and after that to the production. Here charges are allocated in step by step process.
Problems faced by students
- Not being able to cope with theory part is a major worry for all students. Theoretical studies are essential and time taking.
- Practical problems also cause concerns. When given a set of data to allocate costs, students mostly reach out for allocating costs of multiple support departmentsassignment help as it is beyond their reach.
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