Allocated Costs

--ALLOCATED COSTS

ACCOUNTING

Executive Summary

After carrying out cost allocation , a number of inferences can be drawn . The firm will allocate costs and this will improve efficiency in the use of resources

The management ought to improve the performance and activity , through a cost reduction mechanism , adoption of a favourable marketing policy and a sound full to capacity production .Table of contents

Title page ---------------------------------------- 1

Executive summary---------------------------- 2

Table of contents -------------------------------------------------------- 3 Introduction ------------------------------------------ 4

Allocation of costs --------------------------- 4

p References ------------------------------------------------------------------ 6

INTRODUCTION

This report is based on overhead allocation is aimed at measuring the general performance of the company ability to generate revenue and use of resources efficiently . The figures would help users to get an in- depth understanding of the company 's allocation and efficiency with which it is utilizing its assets . For the management , their objective would be on how to improve on poor areas and maintain good performance Its intended users are the management of the company

The report

South Carolina Electricity and Gas has been chosen for purpose of this assignment . The costs chosen to be allocated are business licenses rates costs , and canteen maintenance costs . I have assumed the expenses for these to be 123 ,000 and 136 ,000 . These expenses will be allocated to production department , distribution department and administration departments . They will be allocated based on floor area occupied by each department , which have assumed to at 60 , 25 and 15 respectively for business licenses and rates costs . While for canteen expenses based on employees . Who have assumed to be 250 , 100 and 50 respectively

It will be allocated as follows

cost department administration department

business licenses and rates 123 ,000 Floor area 60 of 123 ,000 73 ,800 25 of 123000 30 ,750 15 of 123 ,000 18 ,450

Canteen expenses 136 ,000 No . of employees 250 X136000

400 85 ,000 100 X136000

400 34 ,000 50 X136000

400 119 ,000 This allocation will be used to assist the management to know the amount of money will allocated to each department . It will also assist in the control of costs so as only those costs that necessary are incurred . This means that each department will be required to maintain those costs that are shown as allocated . It is up to the management to know which costs that need to reduced

References

Ask , U , Ax , C . and Johnson 's (1996 cost management in Sweden : from modern to post modern management accounting

Drury C (2000 Management and cost Accounting 5th edition ,business press Thomson Learning

Wald J (2000 ) Biggs 's Cost accounting The English Language Book Society and MacDonald and Evans Ltd London Plymouth

PAGE

PAGE 6...