ALLOCATION OF SERVICE

DEPARTMENT COSTS

SERVICE OR SUPPORT DEPARTMENT Is a unit in an organization that contributes in

a very indirect way to the conversion of raw materials into a finished product.

They are involved directly in producing the goods or services

Provides a service that enables the organization’s production process to take place.

UNITS UNDER SERVICE OR SUPPORT DEPARTMENT

Purchasing Personnel Warehousing Maintenance department

POSSIBLE BASES OF ALLOCATING SERVICE COSTType of Cost Allocation Base

a.) Personnel costs No. of Employees, direct labor costs of no. of new hires

b.) Maintenance costs Number of machine costs

c.) Administration costs Peso value of assets employed

d.) Research & Development costs Assets employed, new products

e.) Cafeteria costs Number of employees

f.) Public Relations & Corporate Function Amount of Sales

g.) Legal Costs Assets Employed

h.) Warehousing Costs Area occupied

i.) Materials and Storeroom costs Number of Materials Move

j.) Power costs Kilowatt hours used

k.) Engineering costs Number of hours utilized

l.) Shipping costs Number of orders shipped

m.) Purchasing costs No. of purchase orders/Peso value of purchase orders