Hi,
Amongst cost allocation techniques like:
Direct Cost
Simultaneous Equation Method along with Reciprocal Method
Trial & Err Method including Repeat Distribution method
Please remember that Direct cost apportioning gives 100% accurate costs from the below:
| Production | Services | ||||||||
| Department | A | B | C | X | Y | Total | |||
| From PrimarY Distribution | 3,150 | 3,700 | 1,400 | 2,250 | 1,000 | 11,500 | |||
| % allocation X | 40% | 30% | 20% | 10% | 0% | 1 | |||
| % allocation Y | 30% | 30% | 20% | 0% | 20% | 1 | |||
| Simultaneous equation allcation X | 1000 | 750 | 500 | 0 | 250 | 2,500 | |||
| Actual Allocation X | 900 | 675 | 450 | 0 | 225 | 2,250 | |||
| Simultaneous equation allcation Y | 375 | 375 | 250 | 250 | 0 | 1,250 | |||
| Actual Allocation Y | 300 | 300 | 200 | 200 | 0 | 1,000 | |||
| Workings: | |||||||||
| X = 2,250 + 20/100 Y .................. ( 1 ) | |||||||||
| Y = 1,000 + 10/100 X ...................... ( 2) | |||||||||
| X | 2250+2Y/10 | Y= | 1000+X/10 | ||||||
| X= | (22500+2Y)/10 | Y= | (10000+X)/10 | ||||||
| 10X= | 22500+2Y | 10Y= | 10000+X | ||||||
| 10X-2Y= | 22500 | 10Y-X= | 10000 | ||||||
| Align both equations below: | |||||||||
| 10X-2Y= | 22500 | ||||||||
| 10Y-X= | 10000 | ||||||||
| Multiply X with 10: | |||||||||
| 10X-2Y= | 22500 | ||||||||
| 100Y-10X= | 100000 | ||||||||
| Result | 98Y= | 122500 | |||||||
| Y= | 122500/98= | 1250 | |||||||
| X= | 2250+20/100 (1250)= | 2500 | |||||||
| Repeat Distribution/ Trial & Err allocation for X & Y | |||||||||
| Normal | |||||||||
| X @ 10% | Y @ 20% | ||||||||
| 2,250 | 1,000 | ||||||||
| 1450*10% | 145 | 450 | 2250*20% | ||||||
| 29*10% | 3 | 29 | 145*20% | ||||||
| 1*10% | 0 | 1 | 3*20% | ||||||
| Totals | 2,398 | 1,480 | |||||||
Txs
CAclubindia
