Purchase Solution

Allocating the Costs of Shared Facilities

Not what you're looking for?

Ask Custom Question

Cool Surfboards has two departments that both use a conference room (shared facilities). Total monthly conference room cost is $1,000. The Wave Blaster department has 15 employees that reserved 60 hours of conference room time. The Boogie Break department has 5 employees that reserved 100 hours of conference room time.

a) If Cool Surfboards allocates shared facilities cost based on hours of use, what is the amount of share facilities costs allocated to the Boogie Break department?

b) If Cool Surfboards allocates shared facilities cost based on hours of use, what is the amount of share facilities costs allocated to the Wave Blaster department?

c) If Cool Surfboards allocates shared facilities cost based on number of employees, what is the amount of share facilities costs allocated to the Boogie Break department?

d) If Cool Surfboards allocates shared facilities cost based on number of employees, what is the amount of share facilities costs allocated to the Wave Blaster department?

e) Which allocation method would be best for the Wave Blaster department?

Purchase this Solution
Solution Summary

Given the costs of shared facilities and two bases of allocation, this solution illustrates how to compute the cost to each party under each allocation basis.

Solution Preview

a) If Cool Surfboards allocates shared facilities cost based on hours of use, what is the amount of share facilities costs allocated to the Boogie Break department?

Wave Blaster hours of use 60
Boogie Break hours of use 100
Total hours of use 160 (60+100)
Boogie Break portion 62.5% (100/160)
Total cost $1,000
Cost allocated to Boogie Break $ 625 ($1,000*.625)

b) If Cool Surfboards allocates shared facilities cost based on hours of use, what is ...

Purchase this Solution
Free BrainMass Quizzes
Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Motivation

This tests some key elements of major motivation theories.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

View More Free Quizzes
Related BrainMass Solutions

  • Allocating shared costs, preparing performance reports

    389388 Musical Notes, Inc: Allocating shared costs; preparing performance reports Allocating shared costs, and preparing performance reports for responsibility centers.

  • Cost allocation

    costs, non-shared fixed costs, and shared fixed costs and potentially allocation ideas for each of these.

  • allocating support departments to operating departments

    362253 allocating support departments to operating departments Cool Surfboards has two departments using the services of the Payroll department. Total monthly payroll shared cost is $6,000.

  • Cost Reallocation

    For multi-purpose facilities, costs are allocated using separable and joint cost allocation factors Explain the impact of allocating common costs for internal decision making. This is one of the government organizations.

  • Economis of scale and scope

    In the given instance, the decision will be as follows - if 30% of total fixed costs > 20% of total sales, Open a shared facility (because your reduction in cost is greater than the revenue generated) if 30% of total fixed costs < 20% of total sales

  • Allocation of common costs for ABC Company

    The multipurpose facilities of CVP are radio, dams, reservoirs, communication devices. The costs are allocated on the basis of purpose served by these services or facilities.

  • Understanding of Cost Reallocation

    In multi-purpose facilities, costs that are allocated using joint cost allocation factors. 3. Explain the impact of allocating common costs for internal decision-making.

  • Cost allocation sample question: Direct method

    In computing these costs, Birch is considering three different methods of allocating overhead costs-the direct method, the step method, and the reciprocal method.

  • Avoid arbitrary cost allocations by not allocating any costs

    There is no rule in managerial accounting that you MUST allocate shared costs. Insurance is shared by all the homes built during the year. You don't have to allocate it. You can expense it in total in the income statement without allocation.

View More Related Solutions