Module 4 B
cost allocation
| If actual copies made are 4,800,000 what are the costs allocated to each department assuming the marketing department requested 2,500,000 copies and HR requested 2,300,000 copies. | ||||
| Salaries and wages (fixed) | $60,000 | |||
| Employee Benefits (fixed) | $8,000 | |||
| Paper (variable $.01 per copy) | $50,000 | |||
| Toner (variable $.01 per copy) | $50,000 | |||
| Depreciation (fixed) | $10,000 | |||
| Utilities (fixed) | $4,000 | |||
| Total | $182,000 | |||
| Marketing Department | HR Department | Total | ||
| # of copies made | 4,800,000 | |||
| costs (.037) (# of copies made X .37) | Note: not all of the $182,000 costs will be allocated |
issues
| What are the problems with using one allocation rate for the copy department’s costs? |
New Allocation
| Devise a better allocation system based on pooling costs. Show how the costs would be allocated based on your new system. | |||||
| Allocate based on two pools-one for fixed costs one for variable | |||||
| Salaries and wages (fixed) | $60,000 | ||||
| Employee Benefits (fixed) | $8,000 | ||||
| Paper (variable $.01 per copy) | $50,000 | ||||
| Toner (variable $.01 per copy) | $50,000 | ||||
| Depreciation (fixed) | $10,000 | ||||
| Utilities (fixed) | $4,000 | ||||
| Total | $182,000 | ||||
| Marketing | HR | total | |||
| Total Fixed Costs | Total Copies | Cost per copy | 2,500,000 | 2,300,000 | 4,800,000 |
| $82,000 | 5,000,000 | $0.016 | |||
| Variable Costs | $ 0.02 | ||||
| $0 | $0 | 0 | |||