NAMA : BAGINDA AUFA LUBIS

NPM : 2399200041

MANAJEMEN AKUNTANSI

SUPPORT-DEPARMENT COST ALLOCATION

RINGKASAN MATERI KULIAH 3

Frequently, the costs of a support department are allocated to other departments through
the use of a charging rate. For example, a company’s Data-Processing Department may serve
various other departments. The cost of operating the DataProcessing Department is then
allocated to the user departments. Sometimes a single charging rate masks the variety of causal
factors that lead to a support department’s total costs.

When companies allocate support-department costs only to the producing departments,

they are using the direct method of allocation. The sequential (or step) method of allocation
recognizes that interactions among the support departments occur. The reciprocal method of
allocation recognizes all interactions among support departments. Under the reciprocal method,
one support department’s use by another figures in determining the total cost of each support
department, where the total cost reflects interactions among the support departments.

Total cost of support departments

Total cost = Direct costs + Allocated costs

Once the total costs of each support department are known, the allocations to the producing
departments can be made.

Upon allocating all support costs to producing departments, an overhead rate can be
computed for each department. This rate is computed by adding the allocated support costs to
the overhead costs that are directly traceable to the producing department and dividing this
total by some measure of activity, such as direct labor hours or machine hours.

When two or more products are produced simultaneously by the same process up to a “split-
off” point, they are called joint products. The split-off point is the point at which the joint
products become separate and identifiable. There are a variety of methods for allocating joint
costs. These methods include the physical units method, the sales-value-at-split-off method,
and the net realizable value method.
 Under the physical units method, joint costs are distributed to products on the basis of
some physical measure. These physical measures may be expressed in units such as
pounds, tons, gallons, board feet, atomic weight, or heat units.

 The sales-value-at-split-off method allocates joint cost based on each product’s

proportionate share of sales value at the split-off point. Under this method, the higher
the market value, the greater the share of joint cost charged against the product.

 When market value is used to allocate joint costs, we are talking about market value at
the split-off point. However, on occasion, there is no ready market price for the
individual products at the split-off point. In this case, the net realizable value method
can be used. First, we obtain a hypothetical sales value for each joint product by
subtracting all separable (or further) processing costs from the eventual market value.
This approximates the sales value at split-off. Then, the net realizable value method can
be used to prorate the joint costs based on each product’s share of hypothetical sales
value.