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  • Allocation of Common Costs - Sheet1

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    The document describes how a company allocated common costs of $40,000 for electricity and water across its manufacturing, marketing, and administrative departments and three products A, B, and C. The costs were allocated based on 1) floor area for departments and 2) physical weight, relative cost price, and relative sales price for products. Manufacturing was allocated $32,000, marketing $5,333, and administration $2,667 based on their floor areas. Products A, B, and C were allocated $20,000, $13,333, and $6,667 respectively based on their physical weights.

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    Allocation of Common Costs - Sheet1 (1)

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    The document describes how a company allocated common costs of $40,000 for electricity and water across its manufacturing, marketing, and administrative departments and three products A, B, and C. The costs were allocated based on 1) floor area for departments and 2) physical weight, relative cost price, and relative sales price for products. Manufacturing was allocated $32,000, marketing $5,333, and administration $2,667 based on their floor areas. Products A, B, and C were allocated $20,000, $13,333, and $6,667 respectively based on their physical weights.

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    © All Rights Reserved
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    11 views2 pages

    Allocation of Common Costs - Sheet1

    Uploaded by

    cherein6soriano6pael
    The document describes how a company allocated common costs of $40,000 for electricity and water across its manufacturing, marketing, and administrative departments and three products A, B, and C. The costs were allocated based on 1) floor area for departments and 2) physical weight, relative cost price, and relative sales price for products. Manufacturing was allocated $32,000, marketing $5,333, and administration $2,667 based on their floor areas. Products A, B, and C were allocated $20,000, $13,333, and $6,667 respectively based on their physical weights.

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    © All Rights Reserved
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    of 2

    Allocation of Common Costs:

    Cost allocation bases:


    1. physical weight
    2. physicla volume or space area
    3. relative cost price
    4. relative sales price

    Illustration:
    Manufacturing, Marketing and Administrative departments of Marjorie Mfg. Company shares occupancy in a single story building own by the company.
    Total floor area of the building is 1,500 sq. meter with manufacturing occupying 1,200 sq. meters, marketing,200
    ; marketing, 200
    sq. meters
    sq. meters and administrative,100 sq. meters
    respectively. The company produces and sells three (3) products weighing 3,000 kgs and costing Php 350,000.00 distributed as follows:

    Product Quantity Cost Sales


    A 1,500kgs. P 225,000.00 P 450,000.00
    B 1,000kgs. P100,000.00 P 200,000.00
    C 500kgs. P 25,000.00 P 50,000.00
    Total: 3,000 kgs. P 350,000.00 P 700,000.00

    The electricity costs and water consumptions for the month amounted to Php 40,000.00

    Required: Allocate the common costs to:


    1. Manufacturing,Marketing and Administrative departments using floor area.
    2. Products A,B and C using:
    a. physical weight
    b. relative cost price
    c. relative sales price

    Computations:

    1. Manufacturing:
    1,200 sq. meters X Php 40,000.00 = Php 32,000.00
    1,500 sq. meters
    Marketing:
    200 sq. meters X Php 40,000.00 = Php 5,333.00
    1,500 sq. meters
    Administrative:
    100 sq. meters X Php 40,000.00 = Php 2,667.00
    1,500 sq. meters

    2. a. Physical weight:
    Product A
    1,500 kgs X Php 40,000.00 = Php 20,000.00
    3,000 kgs.
    Product B:
    1000 kgs X Php 40,000.00 = Php 13,333.00
    3,000 kgs
    Product C:
    500 kgs X Php 40,000.00 = Php 6,667.00
    3,000 kgs

    b. Relative Cost Price


    Product A
    Php 225,000.00 X Php 40,000.00 = Php 25,714.00
    Php 350,000.00
    Product B
    Php 100,000.00 X Php 40,000.00 = Php 11,429.00
    Php 350,000.00
    Product C
    Php 25,000.00 X Php 40,000.00 = Php 2,857.00
    Php 350,000.00

    c. Relative Sales Price


    Product A
    Php 450,000.00 X Php 40,000.00 = Php 25,714.00
    Php 700,000.00
    Product B
    Php 200,000.00 X Php 40,000.00 = Php 11,429.00
    Php 700,000.00
    Product C
    Php 50,000.00 X Php 40,000.00 = Php 2,857.00
    Php 700,000.00

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