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Lecture Managerial accounting for managers (4e) - Appendix 12B: Service department charges

After studying this chapter, you should be able to: Allocate service department costs to operating departments using the direct method, allocate service department costs to operating departments using the step-down method. | Service Department Charges Appendix 12B Appendix 12B: Service Department Charges Learning Objective 12-6 Charge operating departments for services provided by service departments. Learning objective number 12-6 is to charge operating departments for services provided by service departments. Service Department Charges Operating Departments Carry out central purposes of organization. Service Departments Do not directly engage in operating activities. Most large organizations have both operating departments and service departments. The central purposes of the organization are carried out in the operating departments. In contrast, service departments do not directly engage in operating activities. This appendix discusses why and how service department costs are allocated to operating departments. Reasons for Charging Service Department Costs To encourage operating departments to wisely use service department resources. To provide operating departments with more complete cost data for . | Service Department Charges Appendix 12B Appendix 12B: Service Department Charges Learning Objective 12-6 Charge operating departments for services provided by service departments. Learning objective number 12-6 is to charge operating departments for services provided by service departments. Service Department Charges Operating Departments Carry out central purposes of organization. Service Departments Do not directly engage in operating activities. Most large organizations have both operating departments and service departments. The central purposes of the organization are carried out in the operating departments. In contrast, service departments do not directly engage in operating activities. This appendix discusses why and how service department costs are allocated to operating departments. Reasons for Charging Service Department Costs To encourage operating departments to wisely use service department resources. To provide operating departments with more complete cost data for making decisions. To help measure the profitability of operating departments. To create an incentive for service departments to operate efficiently. Service department costs are charged to operating departments for a variety of reasons including: Service department costs are charged to operating departments for a variety of reasons including: 1. To encourage operating departments to wisely use service department resources. 2. To provide operating departments with more complete cost data for making decisions. 3. To help measure the profitability of operating departments. 4. To create an incentive for service departments to operate efficiently. $ Transfer Prices Operating Departments Service Departments The service department charges considered in this appendix can be viewed as a transfer price that is charged for services provided by service departments to operating departments. The service department charges considered in this appendix can be viewed as a transfer price that is .