Allocation of Common Costs:

Cost allocation bases:

1. physical weight
2. physicla volume or space area
3. relative cost price
4. relative sales price

Illustration:
Manufacturing, Marketing and Administrative departments of Marjorie Mfg. Company shares occupancy in a
Total floor area of the building is 1,500 sq. meter with manufacturing occupying 1,200 sq. meter
respectively. The company produces and sells three (3) products weighing 3,000 kgs and costing Php 350,00

Product Quantity Cost Sales

A 1,500kgs. P 225,000.00 P 450,000.00
B 1,000kgs. P100,000.00 P 200,000.00
C 500kgs. P 25,000.00 P 50,000.00
Total: 3,000 kgs. P 350,000.00 P 700,000.00

The electricity costs and water consumptions for the month amounted to Php 40,000.00

Required: Allocate the common costs to:

1. Manufacturing,Marketing and Administrative departments using floor area.
2. Products A,B and C using:
a. physical weight
b. relative cost price
c. relative sales price

Computations:

1. Manufacturing:
1,200 sq. meters X Php 40,000.00 = Php 32,000.00
1,500 sq. meters
Marketing:
200 sq. meters X Php 40,000.00 = Php 5,333.00
1,500 sq. meters
Administrative:
100 sq. meters X Php 40,000.00 = Php 2,667.00
1,500 sq. meters

2. a. Physical weight:
Product A
 1,500 kgs X Php 40,000.00 = Php 20,000.00
3,000 kgs.
Product B:
1000 kgs X Php 40,000.00 = Php 13,333.00
3,000 kgs
Product C:
500 kgs X Php 40,000.00 = Php 6,667.00
3,000 kgs

b. Relative Cost Price

Product A
Php 225,000.00 X Php 40,000.00 = Php 25,714.00
Php 350,000.00
Product B
Php 100,000.00 X Php 40,000.00 = Php 11,429.00
Php 350,000.00
Product C
Php 25,000.00 X Php 40,000.00 = Php 2,857.00
Php 350,000.00

c. Relative Sales Price

Product A
Php 450,000.00 X Php 40,000.00 = Php 25,714.00
Php 700,000.00
Product B
Php 200,000.00 X Php 40,000.00 = Php 11,429.00
Php 700,000.00
Product C
Php 50,000.00 X Php 40,000.00 = Php 2,857.00
Php 700,000.00
any shares occupancy in a single story building own by the company.
; marketing, 200 sq. meters and administrative,100 sq. meters
kgs and costing Php 350,000.00 distributed as follows: