7 -1

CHAPTER
8

Biaya
Overhead
Pabrik

7 -2

Objectives
Objectives
1. Describe theAfter
difference
between
support
studying
this
After studying this
departmentschapter,
and producing
departments.
you
should
chapter, you should
2. Calculate single be
and
multiple
changing
rates
able
to:
be able to:
for a support department.
3. Allocate support-department costs to
producing departments using the direct,
sequential, and reciprocal methods.
4. Calculate departmental overhead rates.

7 -3

Types
Types of
of Departments
Departments
Producing
departments are
directly responsible for
creating the products or
services sold to
customers.

7 -4

Types
Types of
of Departments
Departments
Supporting
departments provide
essential support
services for producing
departments.
Maintenance, grounds,
engineering, personnel, storage

Steps
Steps in
in Allocating
Allocating Support
Support Department
Department
Costs
Costs to
to Producing
Producing Departments
Departments
1. Departmentalize the firm.
2. Classify each department as a support
department or a producing department.
3. Trace all overhead costs in the firm to a
support department or producing
department.
4. Allocate supports department costs to the
producing departments.
Continued
Continued

7 -5

Steps
Steps in
in Allocating
Allocating Support
Support Department
Department
Costs
Costs to
to Producing
Producing Departments
Departments
5. Calculate predetermined overhead rates
for the producing departments.
6. Allocate overhead costs to the units of
individual products through the
predetermined overhead rates.

7 -6

Examples of Cost Drivers for

Support Departments
Support Department

Possible Driver

Accounting

Number of transactions

Cafeteria

Number of employees

Engineering

Number of change orders

Maintenance

Machine hours; maintenance

hours

Payroll

Number of employees

Personnel

Number of employees, firings,

layoffs, new hires

7 -7

7 -8

Objectives
Objectives of
of Allocation
Allocation
1. To obtain a mutually agreeable price.
2. To compute product-line profitability.
3. To predict the economic effects of planning
and control.
4. To value inventory.
5. To motivate managers.

7 -9

Note
Note Objective
Objective 5:
5: Allocations
Allocations can
can
be
be used
used to
to motivate
motivate managers.
managers.

7 -10

AND

Fixed costs $26,190

Variable costs.. $0.023 per page

7 -11

A Single Charge Rate

Estimated usage (in pages) by the three producing
departments is as follows:
Audit Department
Tax Department
MAS Department
Total
Variable cost: 270,000 x $0.023
Fixed cost
Total cost for 270,000 pages
Average cost ($32,400 270,000)

94,500
67,500
108,000
270,000
$ 6,210
26,190
$32,400
$0.12 per page

7 -12

A Single Charge Rate

Total Photocopying Department Charge
Number x Charge = Total
of Pages
per Page
Charges
Audit Department

92,000

$0.12

$11,040

Tax Department

65,000

0.12

7,800

115,000

0.12

13,800

MAS Department
Total

272,000

$32,640

Multiple Charging Rates

Proportion
of Peak
Usage

Total
Fixed
Costs

Amount
Allocated to
Each
Department

7,875

0.20

$26,190

$ 5,238

22,500

0.57

26,190

14,928

9,000

0.23

26,190

6,024

Peak
Number
of Pages
Audit
Tax
MAS
Total

7 -13

39,375

$26,190

Multiple Charging Rates

7 -14

Number of
Pages x
Fixed Cost
Total
$0.023 + Allocation = Charges
Audit department

$2,116

$ 5,238

$ 7,354

Tax department

1,495

14,928

16,423

MAS department

2,645

6,024

8,669

$6,256

$26,190

$32,446

Total

Budgeted Versus Actual Usage

When
When we
we allocate
allocate supportsupportdepartment
department costs
costs to
to the
the producing
producing
departments,
departments, should
should we
we allocate
allocate
actual
actual or
or budgeted
budgeted costs?
costs?

7 -15

Budgeted Versus Actual Usage

Budgeted
Budgeted costs.
costs.

7 -16

Budgeted Versus Actual Usage

A
Ageneral
general principle
principle of
ofperformance
performance evaluation
evaluation isis
that
that managers
managers should
should not
not be
be held
held responsible
responsible for
for
costs
costs or
or activities
activities over
over which
which they
they have
have no
no control.
control.

7 -17

7 -18

Use of Budgeted Data for

Product Costing
Number of
x
Copies

Total
Rate

Allocated
= Charges

Audit Department

94,500

$0.12

$11,340

Tax Department

67,500

0.12

8,100

108,000

0.12

12,960

MAS Department
Total

270,000

$32,400

Use of Actual Data for

Performance Evaluation Purposes
Number of
x
Copies

Total
Rate

Allocated
= Charges

Audit department

92,000

$0.12

$11,040

Tax department

65,000

0.12

7,800

115,000

0.12

13,800

MAS department
Total

272,000

7 -19

$32,640

Choosing
Choosing A
AService
Service Department
Department
Cost
Cost Allocation
Allocation Method
Method
The three methods for allocating service
department costs to producing departments
are:
The Direct Method
The Sequential Method
The Reciprocal Method

7 -20

Data
Data for
for Illustrating
Illustrating Allocation
Allocation Methods
Methods
Support Departments

Direct costs*

Producing Departments

Power

Maintenance

Grinding

Assembly

$250,000

$160,000

$100,000

$ 60,000

-----

200,000

600,000

200,000

1,000

-----

4,500

4,500

Normal activity:
Kilowatt-hours
Maintenance hours

*For a producing

department, direct costs refer only to

overhead costs that are directly traceable to the department.

7 -21

7 -22

Direct
Direct Method
Method of
of Allocation
Allocation
Power

Maintenance

Grinding

Assembly

7 -23

Direct
Direct Method
Method of
of Allocation
Allocation
Power

Maintenance

Grinding

Assembly

7 -24

STEP 1CALCULATE ALLOCATION RATIOS

Grinding
600,000
Power =
(600,000 + 200,000)

0.75

200,000
(600,000 + 200,000)
Maintenance =

4,500
(4,500 + 4,500)
4,500
(4,500 + 4,500)

Direct
DirectMethod
Method

Assembly

0.25

0.50
0.50

7 -25

STEP 2ALLOCATE SUPPORTS DEPARTMENT

COSTS USING THE ALLOCATION RATIOS

Direct costs
Power a

Support Departments Producing Departments

Power Maintenance Grading Assembly
$250,000
$160,000 $100,000 $ 60,000
-250,000

---

187,500

62,500

---

-160,000

80,000

80,000

Maintenance b
$

$367,500 $202,500

0.75 x $250,000 = $187,500; 0.25 x $250,000 = $62,500

0.50 x $160,000 = $80,000

Direct
DirectMethod
Method

7 -26

Sequential
Sequential Method
Method of
of Allocation
Allocation
STEP 1: Rank service departments

Power

Maintenance

7 -27

Sequential
Sequential Method
Method of
of Allocation
Allocation
STEP 2

Power

Maintenance

Grinding

Assembly

7 -28

Sequential
Sequential Method
Method of
of Allocation
Allocation
STEP 2

Maintenance

Grinding

Assembly

7 -29

STEP 1CALCULATE ALLOCATION RATIOS

Maint. Grinding Assembly
200,000
Power =
(200,000 + 600,000 +
200,000)
600,000
(200,000 + 600,000 +
200,000)

0.20

Sequential
SequentialMethod
Method

0.60

7 -30

STEP 1CALCULATE ALLOCATION RATIOS

Maint. Grinding Assembly
Mainte- =
nance

4,500
(4,500 + 4,500)
4,500
(4,500 + 4,500)

Sequential
SequentialMethod
Method

0.50

0.50

7 -31

STEP 2ALLOCATE SUPPORT DEPARTMENT

COSTS USING THE ALLOCATION RATIOS

Direct costs
Power a

Support Departments Producing Departments

Power Maintenance Grading Assembly
$250,000
$160,000 $100,000 $ 60,000
-250,000

50,000

150,000

50,000

---

-210,000

105,000

105,000

Maintenance b
$

$355,000 $215,000

0.20 x $250,000 = $50,000; 0.60 x $250,000 = $150,000;

0.20 x $250,000 = $50,000

0.50 x $210,000 = $105,000

Sequential
SequentialMethod
Method

7 -32

The reciprocal method of

allocation recognizes all
interactions among
support departments.

Reciprocal Method

7 -33

Support Departments Producing Departments

Power Maintenance Grading Assembly
Direct costs:
Normal activity:
Kilowatt-hours
Maintenance
hours

---

200,000

600,000

200,000

1,000

---

4,500

4,500

Proportion of Output Used by Departments

Power Maintenance Grading Assembly
Allocated ratios:
Power
Maintenance

---

0.20

0.60

0.20

0.10

---

0.45

0.45

7 -34

M = Direct costs + Share of Powers costs

M = $160,000 + $50,000 + 0.02M
0.98M = $210,000
M = $214,286

7 -35

P = Direct cost + Share of Maintenances cost

P = $250,000 + 0.1($214,286)
P = $250,000 + $21,429
P = $271,429

7 -36

ALLOCATE SUPPORT DEPARTMENT COSTS

USING THE ALLOCATION RATIOS AND THE
SUPPORT-DEPARTMENT COSTS FROM
RECIPROCAL METHODS EQUATIONS
Support Departments Producing Departments
Power Maintenance Grading Assembly
Direct costs
Power

$250,000

$160,000

-271,429

54,286

162,857

54,286

271,429

-214,286

96,429

96,429

Maintenance
Total

from
from
Slide 7-35 Slide 7-34

$100,000 $ 60,000

$359,286 $210,715

7 -37

Comparison
Comparison of
of Support
Support Department
Department Cost
Cost
Allocations
Allocations Using
Using the
the Direct,
Direct, Sequential,
Sequential, and
and
Reciprocal
Reciprocal Methods
Methods

Direct costs
Allocated from power
Allocated from maintenance
Total cost

Direct Method
Grinding Assembly
$100,000 $ 60,000
187,500

62,500

80,000

80,000

$367,500

$202,500

Click on button to compare with sequential method

Click on button to compare with reciprocal method

Return
to show

7 -38

Comparison
Comparison of
of Support
Support Department
Department Cost
Cost
Allocations
Allocations Using
Using the
the Direct,
Direct, Sequential,
Sequential, and
and
Reciprocal
Reciprocal Methods
Methods

Direct costs

Sequential Method
Grinding Assembly
$100,000 $ 60,000

Allocated from power

150,000

50,000

Allocated from maintenance

105,000

105,000

$355,000

$215,000

Total cost

Click on button to compare with direct method

Click on button to compare with reciprocal method

Return
to show

7 -39

Comparison
Comparison of
of Support
Support Department
Department Cost
Cost
Allocations
Allocations Using
Using the
the Direct,
Direct, Sequential,
Sequential, and
and
Reciprocal
Reciprocal Methods
Methods

Direct costs
Allocated from power
Allocated from maintenance
Total cost

Reciprocal Method
Grinding Assembly
$100,000 $ 60,000
162,857

54,286

96,429

96,429

$359,286

$210,715

Click on button to compare with direct method

Click on button to compare with sequential method

Return
to
show

Departmental Overhead Rates

The overhead rate for the grinding department is computed
as follows (assuming the normal level of activity is 71,000
MH):
OH rate = $355,000 71,000 = $5 per MH
The overhead rate for the assembly department is computed
as follows (assuming the normal level of activity is 107,500
DLH):
OH rate = $215,000 107,500 = $2 per DLH

7 -40

7 -41

Product
Product Unit
Unit Cost
Cost
A product requires two machine hours of
grinding per unit and one hour of assembly.
Overhead cost assigned:
2 x $5
1 x $2
Total assigned

$10
2
$12

7 -42

Chapter Seven

The
The End
End

7 -43