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    KEDGE BS-IBB4 - Management Control & Operations: The French Cost Accounting Method Correction

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    Arnaud Delacour
    This document presents an example of applying the French cost accounting method to allocate indirect costs across support and primary sections. It includes: 1) Total monthly indirect costs of €447,800 to be allocated to utilities, maintenance, supplying, manufacturing, and distribution sections. 2) Cost allocation tables showing how support section costs are first allocated to each other before being allocated to primary sections. 3) Calculations of the total indirect costs and overhead rates for each primary section after full cost allocation. 4) Examples of applying the overhead rates to determine purchasing costs and indirect cost allocations between products A and B.

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    KEDGE BS-IBB4 - Management Control & Operations: The French Cost Accounting Method Correction

    Uploaded by

    Arnaud Delacour
    11 views2 pages
    This document presents an example of applying the French cost accounting method to allocate indirect costs across support and primary sections. It includes: 1) Total monthly indirect costs of €447,800 to be allocated to utilities, maintenance, supplying, manufacturing, and distribution sections. 2) Cost allocation tables showing how support section costs are first allocated to each other before being allocated to primary sections. 3) Calculations of the total indirect costs and overhead rates for each primary section after full cost allocation. 4) Examples of applying the overhead rates to determine purchasing costs and indirect cost allocations between products A and B.

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    Ex 8 French Acct Method CORR

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    This document presents an example of applying the French cost accounting method to allocate indirect costs across support and primary sections. It includes: 1) Total monthly indirect costs of €447,800 to be allocated to utilities, maintenance, supplying, manufacturing, and distribution sections. 2) Cost allocation tables showing how support section costs are first allocated to each other before being allocated to primary sections. 3) Calculations of the total indirect costs and overhead rates for each primary section after full cost allocation. 4) Examples of applying the overhead rates to determine purchasing costs and indirect cost allocations between products A and B.

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    11 views2 pages

    KEDGE BS-IBB4 - Management Control & Operations: The French Cost Accounting Method Correction

    Uploaded by

    Arnaud Delacour
    This document presents an example of applying the French cost accounting method to allocate indirect costs across support and primary sections. It includes: 1) Total monthly indirect costs of €447,800 to be allocated to utilities, maintenance, supplying, manufacturing, and distribution sections. 2) Cost allocation tables showing how support section costs are first allocated to each other before being allocated to primary sections. 3) Calculations of the total indirect costs and overhead rates for each primary section after full cost allocation. 4) Examples of applying the overhead rates to determine purchasing costs and indirect cost allocations between products A and B.

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    KEDGE BS- IBB4 –Management control & Operations 2021

    The french Cost accounting method


    Correction
    At the end of the month, the total indirect costs were € 447 800 shared between support and
    primary sections
    Support Sections Primary sections
    Indirect costs (in €) TOTAL
    Utilities Maintenance Supplying Manufacturing Distribution
    Supplies 90 000,00 9 000,00 9 000,00 18 000,00 27 000,00 27 000,00
    External services 110 000,00 11 000,00 11 000,00 22 000,00 44 000,00 22 000,00
    Wages & personnel related costs 125 800,00 25 800,00 25 000,00 50 000,00 25 000,00
    Depreciation 122 000,00 6 000,00 15 300,00 6 100,00 85 400,00 9 200,00
    447 800,00 26 000,00 61 100,00 71 100,00 206 400,00 83 200,00

    The support sections consumption rates are as following:


    Support Sections Support Sections Primary sections
    consumption rates Utilities Maintenance Supplying Manufacturing Distribution
    Utilities 10% 5% 80% 5%
    Maintenance 20% 20% 40% 20%

    Question 1 : Please prepare the support sections cost allocation table


    There are cross-consumptions between support section. So, we must first try to find out the total
    costs of those sections prior to allocate them.
    If x is the total costs for Utilities, and y is the total costs for Maintenance, so we have :
    X = 26 000 + 0,2 Y and Y = 61 100 +0,1 X
    X = 26 000 + 0,2 ( 61 100 +0,1 X )
    X= 26 000 + 12 220 +0,02 X
    0,98 X = 38 220
    X = 39 000
    Y = 61 100 + (0,1*39 000)
    Y = 65 000
    Support sections Support Sections Primary sections
    costs allocation Utilities Maintenance Supplying Manufacturing Distribution
    Utilities
    26 000,00 - 39 000,00 3 900,00 1 950,00 31 200,00 1 950,00 26 000,00
    Maintenance
    61 100,00 13 000,00 - 65 000,00 13 000,00 26 000,00 13 000,00 61 100,00
    - 26 000,00 - 61 100,00 14 950,00 57 200,00 14 950,00 87 100,00

    IBB4– Management Control & Operations– CORR Ex 8- French cost accounting method
    Page 1
    KEDGE BS- IBB4 –Management control & Operations 2021
    Question 2 : How much is the total indirect cost of each primary section (after support
    section cost allocation)?
    Primary sections
    Primary sections costs
    Supplying Manufacturing Distribution
    1st allocation 71 100,00 206 400,00 83 200,00
    Utilities 1 950,00 31 200,00 1 950,00 35 100,00
    Maintenance 13 000,00 26 000,00 13 000,00 52 000,00
    86 050,00 263 600,00 98 150,00 447 800,00

    Question 3 : How much is the cost of each work-unit ? (or overhead rate)
    Primary sections
    Primary sections costs
    Supplying Manufacturing Distribution
    1st allocation 71 100,00 206 400,00 83 200,00
    Utilities 1 950,00 31 200,00 1 950,00
    Maintenance 13 000,00 26 000,00 13 000,00
    86 050,00 263 600,00 98 150,00
    Work unit Kg bought Machine hours 1 € of sales
    Nbr. Work units 30 000,00 2 000,00 2 600 000,00
    Cost of 1 Work unit (in€) 2,87 131,8 0,038

    Question 4 : How much is the total purchasing cost of M?


    Purchasing costs of M (in€)
    2 040 000,00 purchasing
    86 050,00 supplying
    Total 2 126 050,00
    per kg 70,87 equivalent to € 68+€ 2,87

    Question 5 : How much is the indirect manufacturing cost allocation to A and B?


    Indirect manufacturing costs allocation
    nbr. of Mach hours for A 1 200 A B
    nbr. of Mach hours for B 800 158 160,00 105 440,00

    Question 6 : How much is the indirect distribution cost allocation to A and B?


    Indirect distribution costs allocation
    Sales of A (in€) 1 200 000,00 A B
    Sales of B(in€) 1 400 000,00 45 300,00 52 850,00

    IBB4– Management Control & Operations– CORR Ex 8- French cost accounting method
    Page 2

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