You are working in accounting department of Frank Compagny.
You will allocate the support department costs to operating departments using Direct Method. You have also to explain the details of calculations to Mr Ibrahim who is a student having training in Frank company (you will explain the formulas used in the calculations to Mr Ibrahim).
The information for the current period is as follows:
Support Departments
Operating Departments
Administration Houskeeping Medical
Dintal Total cost 32,400 50,000 130,000 180,000 310,000
Allocation Bases:
Support Departments
Operating Departments
Administration Houskeeping Medical
Dental Total No. of Employees
2 2 6 2 12 Square Feet
900 100 6,000 4,000 11,000
Administration Cost will be allocated using number of employees and Housekeeping cost will be allocated using square feet.
Explain to Mr Ibrahim the objectives of allocation of support department costs.
Discuss with Mr Ibrahim why you are using the direct method. What are the other possible methods? What is the difference between these methods and when we will have to use each method?
You are working in accounting department of Frank Compagny.
You will allocate the support department costs to operating departments using Direct Method. You have also to explain the details of calculations to Mr Ibrahim who is a student having training in Frank company (you will explain the formulas used in the calculations to Mr Ibrahim).
The information for the current period is as follows:
Support Departments | Operating Departments | ||||
Administration | Houskeeping | Medical | Dintal | Total | |
cost | 32,400 | 50,000 | 130,000 | 180,000 | 310,000 |
Allocation Bases:
Support Departments | Operating Departments | ||||
Administration | Houskeeping | Medical | Dental | Total | |
No. of Employees | 2 | 2 | 6 | 2 | 12 |
Square Feet | 900 | 100 | 6,000 | 4,000 | 11,000 |
Administration Cost will be allocated using number of employees and Housekeeping cost will be allocated using square feet.
Explain to Mr Ibrahim the objectives of allocation of support department costs.
Discuss with Mr Ibrahim why you are using the direct method. What are the other possible methods? What is the difference between these methods and when we will have to use each method?