Introduction

 In manufacturing companies there are two departments namely production

department and supporting department.
 Production department is a department that carries out changes or implements the
production process and supporting department is a department that provides
services to the production department.
 Example of supporting department is maintenance of machinery, buildings and
floors department.
 Because the production department is served by the supporting department, the
operational costs of the supporting department must be allocated to the production
department.
Introduction
There are some methods to allocate overhead cost in supporting department, such as:
1. Direct Method
2. Step Method
3. Algebra Method
1. Direct Method
The direct method is one of the methods often used to allocate the costs of the
supporting department, because of its simplicity in calculation and its ease of use.

Example:
PT. KARANA, which has two supporting departments and two production
departments. The total overhead for a period is shown in the table below. Building
and floor maintenance costs are allocated to the machinery and assembly
departments based on floor area, factory administration department costs are
allocated based on estimated labor hours. Factory overhead rates for the production
department are based on direct labor hours.
2. Step Method
The step method is better than the direct method because this method considers the
services provided to other support departments. The steps:
a. The cost of the supporting department providing the most services to other
department is usually allocated first.
b. The cost of the supporting department providing the next greatest service (after
the first) to the supporting department is allocated later.
c. This series of activities is continued, step by step, until all supporting department
costs are allocated to the production department.
3. Algebra Method
This method is the best of the three methods,
because the algebraic method considers the reciprocal services that are related
between the assistant departments.
Study Case
The company "SINCAN" produces
various types of ceramics by dividing its
operations into 2 (two) production
departments namely the Mixing I
Department and the Finishing II
department and 2 (two) Service
departments namely the Factory A
Department and the Electric B
Department. The BOP budget for the
production department, after taking into
account the allocation from the service
department as follows:
Question:
Answer: