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    14 views26 pages

    Quantz

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    Copyright:

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    of 26
    SS STBIMS EMCEE ~ 7p: Pharhant Shake. Assigning Service Deparment Costs ‘We ean usualy dings wo 1ypee of department ina oxpanizinyprodhcen deparanets wr opening Zopements whi ditetly produce or Gitebute the fem’scuipa and sevice (Soetments whose min ipa et prods sence fo other departments. Exemples of such Rie eparmene indade wltts,tnisance, production eantol, stockton, mati FES Ata Tectiaceping aed infocmmo tse, oie scar RAID ce adoring frodhce company wie ecrvices say not be ladued in this analy uns thee opt Frodhced for specie daperenents o ead In this chaps, we wil dects the poets of stb or aoetng the este of sevice “Epntinents to operangdeparmnents and prodets [Attaibution and Allocations: \Wevsil make distinson becween atuibsin and alloc, “retin the pce of asiging a cot that ie ateoited witha parular cot object Such ‘Sos than be atabuted are sometimes so efeed toa separable. ost dat cannot be ature canbe either oie costo common cost. Alain i the sess Ge Saging revue cout to une tea duet mearure does aot exit for basi of ESgning Some rogue Goaae slennv) teanue ae fo be eed for deg the bai of oso. Rationale for allocating service costs: “Thee ace many temons sad advantages of slang servce costs to wseedepatmant other ‘hee eparmsts or prodacon deparunene). Theses 1 Por purposes of asesing cost of goods sold and inventory valuation eet in extern oscil poring 2 Toss te performance fhe seize depateeots 4. To ensure tat the sence te elfen weed by te wer parsnen. 1 no eats att toc to wets for senses rendered, thn there may be a tendency onthe past of the {ses to wnt consume more rence than needed noting that ts got ie of cove 4 To ensue int the sees ae produced effinly by comparing internal cots of the ‘cevice agaist exter coms td ence to decide whether the series shoul be provided Inchowe or posed fom esta suscee 14 With chuage ot sytem, wots ze made neaze ofthe costs them, Inthe absence of « charge ou he eve department nay —f avoid complains Com wets, tnd to provide ‘ign gully sewsee to mcr all the domands fom the bss, using mote sources than peccsny Pi wl incre the cont of the serie and node wil be aac of ts! ‘By having chage out, see wil be avace ofthe conte and maybe peepee pay higher pce for extn services gennely needed. TT such & stotton asses anc the secs [ipsaiment camer ext the fll neds then Jecions on expansion of cipaciy may be ‘onder. Page3 Measure for Cost Allocation 1. Whece the service cost ae of an stubble nature ti elaiely oy to wie cecy defined direct measae to chage ot the sevice cat to the eset og Powe comsunne smeteed by user depatment on Kh measee, team/aatr on acd ictred volume of Consumption ee 2 Where the service se of« vad nature thn mip measure may Ive to be used for ‘ich component of the sevice eg computer charges ate wually made on CPU tage toe, dts roape on dks /tspes ured, reports on page ned ee, 3. The more diiul tenis dat of services wich have no det meas ef. power not ‘metered bilng maintenance, syerision et In tach css the sees posed soe cect elites any ely definable mease Te may not be wore evelvng a ease ‘thine a cont exec othe cose ob asgned ae tlt seal sn such eases rome inditet indent i sed ass meatune, eg. (armed powes by tt ‘wntage of machine installed, stores cons on space ae condoning cons cx ee eobone ‘nilding costs on oo space ex) ‘Some Common Measures Used As Basis Of Allocation cost. BASE Tesoand Deparment o [No.of enplonecs Ganieen and Walfce No.of worker Sipewision Tabour wages/No. of employees Tepreton sean PES 253 ana rncc tow ‘Maintenance and epaie Laboac howe epent/ No of michines “ting sod lighting Floors ‘Balding maintenance ‘Gabi contene Motive power expenses Howse power “Bkerde power snd lighting Wage Store keping expenses Weight crvaloe of ates ‘Maeda handing Volume ‘Camper Fotos “Taspon senior expenses Mieage/tonnage/pacager/ No of pe Bling No.of ili, Page ‘Methods of Service Cost Allocation: “Thereare tee methods: ‘e Discer method 2 Sequel (Step ladder method) 5. Simulaneou Enon (Mats) Method Using name examples we wl describe the fextes ofeach ofthe metho ad sow how to cee etc eo llocaons Lats one wl pve detas ofthe constuction dhe del sed (eens method and highlight many adrantagee as agin other methods. Conse simple ese of thee service departments SI, S259 and to production douse [tnd P2-Tale below ge the deals of the proparon of sevices render by exh service “Rnnanuic to other vee] pesuction department, the (ot variable cos Of the sence Asgereents ovr planed peed andthe numberof wits of service. In price caly the basic dia on actual number of units of services given by + service Tepetanat to other wes wil be evalie, fom which dhe propotions have w be competed ‘Wetave aot shown soc deals ere = Ss a | 2 | s 5 oe] = ce 3 40 [0] 0] Peoponion 4) Pa so | 0 | 30 Pe 30 [so [20 “Vacate Goat a 000) | @_[_90_| 20 Unie of Seve “000 | 1000 ‘As pee bore dts, peovidessevics not only to production departments PY aod P2 direc sae serves depuuments SP td 3. St alzoeecives sevice fom SD ard 3. Tht 10 Ty, seties ave gen not ol ta production departments decy but ae ho repeal thang benwean sevice {tis the presence of sch sera exchanges hat completes the procedure of ost tllocadons, Weve del with he problem when we come tothe hed method Pages 4, Direct Method Ta this method ie assumed that sevices ate rendered aly to production deparments dieetiy Gnd none to any other service Upactens, Should thre be exchanges of sees between Zovice departs these ate spy ignored. The allcrdon proporsons ar thea recompated {Soul vo 100% deleting the propanionsllocted to service deparenents Tse aocations cn breasted ext tng the sllocation of sevies service deparenent in the above exsmple the propotiont tients tendered deel tothe to production departments wil be te-computed From the odin! thle wr have deleted she slation proportion to all edhe sevice ‘Sepunmentyleaving oly the propoctons to Pla Pa and then ecompate the peoportons {olonl wo 100% Fer eg. Proporton fromm St wil be PI = 50% and P2 = 30% oulog any ‘0"e Thas the cevied proportion ofcevees for St ety to PI and P2 wil be 0/8 (6254 an 30/80 37 394s computations ae done for othe sevice depen a= 7s soo 6 s_[ 0 oo [ooo PL] @s [waked seed PE ss | $56 [ato | proportions | “Theallocations of vaible ost bythe ect method ae easly cleat a: “ToPE: 04625 (6 + 0448 @) +060 120) = 145 ‘ToPE 0375 (at) + 0556 (8) #040 (120) = 115, (Obseve that he total allocated cots tip with he sped total of 260. ‘Yon wil observe that ode this method rey to apply the method docs not rect he fue ftw of exchanges of sacs between evi department Page 2, Sequential (Steps laddee) Method Jn the method some conidanton i gven to the exchange of services becween sevice parent “The serie deparements ae lst in onder, da i the Blt which gives series to the Ingest Tumber ef ether vice Jeparnemt or the one that gives = igh proporion ofl erie ‘thee sevice deparenens wl be Hated fst Soredines the service depart wih the gest ‘oot ted the fs ors combination ofthe res sated above is ued Nowe there wil amy ‘besomne doubt and bitacoes inthe ocr of btn te sevice patna tie now assumed that seve can Bow oly in one dsetion fom a department sted higher © hts aed ler bt never bacoard to 3 department Ist higher. “The sboetion proparions ae ceadjusted clniaalog the backward Movs, The sewice Rprimens ae Sow lated in the onder deterned “Then, the Sst lnted serie costs ace dhgged ut to other department ited lower at per ‘evaed proporions. Then, the charge out of cows of next Servis department ken But ate ‘hav theca fo be aocated se how ten athe ttl of own cot plo tc allocatd cos ‘ecrved fom the previous deparenens na the allocaons made as pe evel peoprons “Thos by + sequent step by sep proce the service department cst ae progres ‘ved lve, some t oder service depanmants ad some to production patent, wot = ‘he at sage al cots woul ave been eaied ver tothe produto depart “This method is benar dha the dec method: But it wil involve some cess compton: Howerer, the mathod har he devwback thatthe tag ofthe sence departments for the rogue cations may not be dearest Diferences isting may prose ellen seule, Fortec erin exchanges (backaasd Now ze gnored which alo affect he tropes “The computation of the step method ate hown blow Sine $3 ge lege proporon of ir eres to other service depattment and it i alo the highest com deparmen, $9 wil be lied as he fist then St asf services mote than one

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