BUS 202 Lecture 8: February 8th

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February 8th Wednesday, February 8, 2017 9:13 AM Audio 1 • Process costing: ○ Raw material -> Department A- > Department B- > Department C- > Sold § Departments known as operating departments § HR, Legal, Custodial (service Departments) □ Serve operating departments □ How do we get these service departments costs into the operating departments? ® Take money being occurred from (HR, Legal, Custodial) and add them to each Department A -> Department B- > Department C □ How to allocate costs: ® Direct method ◊ Allocates cost directly to the operating departments ® Step down • Service department break down: ○ Ex: (green = service) (orange = operating) Human Resources (HR) Custodial Lab Care Total Costs $360,000 $90,000 $216,000 $689,000 $1,400,000 § Employee hours 12,000 6,000 18,000 30,000 66,000 Space (sq/feet) 10,000 200 5,000 45,000 60200 § HR □ Allocated based on employee hours Custodial: § □ Allocated based on sq feet § Direct: ------ HR Custodial Labs Care Costs $360,000 $90,000 $261,000 $689,000 Hr cost ($360,00 (18,000 Hr/(18,000 Hr + (30,000Hr/(30,000Hr+ for labs 0) 30,000 Hr) = 18,000Hr)) = and care (0.375 * $360,000) = (0.625 * $360,000) = $135,000.0 $225,000.0 □ Custodial ($90,000) (5,000sqft/(5,000sqft + (45,000sqft /(45,000sqft + cost 45,000sqft)) = 5,000sqft) = (0.9 * $90,000) = Stepdown for labs (0.1 * $90,000) = $81,000.00 Method and care $9,000.00 February 8th Wednesday, February 8, 2017 9:13 AM Audio 1 • Process costing: ○ Raw material -> Department A- > Department B- > Department C- > Sold § Departments known as operating departments § HR, Legal, Custodial (service Departments) □ Serve operating departments □ How do we get these service departments costs into the operating departments? ® Take money being occurred from (HR, Legal, Custodial) and add them to each Department A -> Department B- > Department C □ How to allocate costs: ® Direct method ◊ Allocates cost directly to the operating departments ® Step down • Service department break down: ○ Ex: (green = service) (orange = operating) Human Resources (HR) Custodial Lab Care Total Costs $360,000 $90,000 $216,000 $689,000 $1,400,000 § Employee hours 12,000 6,000 18,000 30,000 66,000 Space (sq/feet) 10,000 200 5,000 45,000 60200 § HR □ Allocated based on employee hours Custodial: § □ Allocated based on sq feet § Direct: ------ HR Custodial Labs Care Costs $360,000 $90,000 $261,000 $689,000 Hr cost ($360,00 (18,000 Hr/(18,000 Hr + (30,000Hr/(30,000Hr+ for labs 0) 30,000 Hr) = 18,000Hr)) = and care (0.375 * $360,000) = (0.625 * $360,000) = $135,000.0 $225,000.0 □ Custodial ($90,000) (5,000sqft/(5,000sqft + (45,000sqft /(45,000sqft + cost 45,000sqft)) = 5,000sqft) = (0.9 * $90,000) = Stepdown for labs (0.1 * $90,000) = $81,000.00 Method and care $9,000.00 and care (0.375 * $360,000) = (0.625 * $360,000) = $135,000.0 $225,000.0 □ Custodial ($90,000) (5,000sqft/(5,000sqft + (45,000sqft /(45,000sqft + cost 45,000sqft)) = 5,000sqft) = (0.9 * $90,000) = Stepdown for labs (0.1 * $90,000) = $81,000.00 Method and care $9,000.00 Total: $261,000 + $135,000.0 + $689,000 + $225,000.0 + $9,000.00 = $405,000.00 $81,000.00 = $995,000.00 Stepdown: Problem will tell which order to do things (HR first) § ------ HR Custodial Labs Care Costs $360,000 $90,000 $261,000 $689,000 HR ($360,000) (6,000/(6,000+ (18,000/ (6,000 + (30,000/(6,000 + Stepdown 18,000+30,000)) = 18,000 +30,000)) = 18,000 + 30,000) = (0.1111 *$360,000) = (0.3333*$360,000) (0.5556 * $360,000) $39,996.0 = $119,988.0 = $200,016.0 Custodial ($90,000 + $39,996.0 (5,000sqft/(5,000sq (45,000sqft □ Stepdown = $129,996.00 ) ft + 45,000sqft)) = /(45,000sqft + (0.1 * 5,000sqft) = (0.9 * $129,996.00)= $129,996.00) = $12,999.6 $116,996.4 Total: $261,000 + $689,000 + $119,988.0 + $200,016.0 + $12,999.6 = $116,996.4 = $393,987.6 $1,006,000 ○ Ex: (food Co-Op) ------ Admin Custodial Groceries Coffee Shop Total Costs $200,000 $60,000 $3,860 $340,000 $4,460,000 § Hours 480 320 2,720 160 Space (SqFt) 800 1,200 9,500 500 □ Admin -> Employee Hours □ Custodial -> Space § Direct Method: ------ Admin Custodial Groceries Coffee Shop Costs $200,00 $60,000 $3,860 $340,000 0 Admin ($200,0 (2,720/(2,720 + 160)) = (160/(160+ Direct 00) (0.9444 * $200,000) = 2,720)= (0.0556 * and care (0.375 * $360,000) = (0.62