=+13-38 KK Support-department cost allocations; single-department cost pools; direct, step-down and reciprocal methods OBJECTIVE 3 Gladiator Ltd

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=+13-38 KK Support-department cost allocations; single-department cost pools; direct, step-down and reciprocal methods OBJECTIVE 3 Gladiator Ltd manufactures athletic shoes and athletic clothing for both amateur and professional athletes. The company has two product lines (clothing and shoes), which are produced in separate manufacturing facilities; however, both manufacturing facilities share the same support services for information technology and human resources. The following shows total costs for each manufacturing facility and for each support department:

Variable costs Fixed costs Total costs by department

(in thousands)

Information Technology (IT) $ 500 $ 1500 $ 2 000 Human Resources (HR) $ 100 $ 900 $ 1 000 Clothing $3 000 $7 000 $10 000 Shoes $2 500 $5 500 $ 8 000 Total costs $7 100 $16 900 $24 000 538 Chapter 13: Allocation of support-department costs, common costs and revenues M13_HORN3377_02_LT_C13.indd 538 2/09/13 3:53 PM The total costs of the support departments (IT and HR) are allocated to the production departments (clothing and shoes) using a single rate based on the following:

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Cost Accounting A Managerial Emphasis

ISBN: 9781442563377

2nd Edition

Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan

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