Chapter 5: Cost Allocation

Case Study: Angelo Trucking

Angelo Trucking is divided into two operating divisions: Perishable Foods
and Household Goods. Moreover, there are two service departments:
Personnel and Accounting. Both service departments provide services to
both operating departments and also to the other service department.

The company allocates personnel and accounting costs to each operating

division. Personnel costs are allocated on the basis of employees.
Accounting costs are allocated on the basis of the number of transactions
processed. Allocations for the coming year are based on the following data:
Fachbereich Elektrische
Service Departments Operating Divisions Energietechnik
Personnel Accounting Persishable Household
Prof. Dr. Valerie Wulfhorst
Foods Goods
Budgeted overhead costs 100,000€ 205,000€ 80,000€ 50,000€ Betriebswirtschaftslehre,
(before allocation) (€) insb. Controlling
Number of employees 20 60 60 80
Transactions processed 2,000 200 3,000 5,000 Telefon
02921 378-451
Telefax
02921 378-409
1. Allocate the costs of the service departments to the operational
E-Mail
departments using the direct allocation method. v.wulfhorst@fh-swf.de

2. Allocate the costs of the service departments to the operational

departments using the step-down (sequential allocation) method. Standort Soest
Allocate Accounting costs first, Personnel costs second. Lübecker Ring 2
59494 Soest
3. Allocate the costs of the service departments to the operational
departments using the reciprocal method.

Fachhochschule
Südwestfalen
Sitz: Iserlohn

Hagen
Iserlohn
Meschede
Soest

www.fh-swf.de

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