Mis Ch17 Hw11 Points Hudson Community College Enrolls

Mis Ch17 Hw11value909 Pointshudson Community College Enrolls Studen

Mis Ch17 Hw11value909 Pointshudson Community College Enrolls Students in two departments, Liberal Arts and Sciences. The college also has two service departments, the Library and the Computing Services Department. The usage of these two service departments’ output for the year is as follows: Provider of Service User of Service Library — 20 % Computing Services — — Liberal Arts 60 % 30 % Sciences 40 % 50 % The budgeted costs in the two service departments for the year are as follows: Library $ 710,000 Computing Services 240,000 Required: 1. Use the direct method to allocate the budgeted costs of the Library and Computing Services Department to the college’s Liberal Arts and Sciences departments. (Do not round intermediate calculations and round your final answers to the nearest dollar amount. Omit the "$" sign in your response.) Provider of Service Liberal Arts Sciences Library $ $ Computing Total $ $

Paper For Above instruction

Introduction

Cost allocation in organizations with multiple service and production departments is crucial for accurate financial management and decision-making. Two common methods for allocating service department costs are the direct method and the step-down method. The direct method allocates service department costs directly to operating departments without considering the service departments’ interservices, providing a straightforward but less precise allocation compared to the step-down method. This paper discusses the application of the direct method to allocate the budgeted costs of the Library and Computing Services departments at Hudson Community College to its academic departments, namely Liberal Arts and Sciences.

Analysis of the Allocation using the Direct Method

To implement the direct method, the first step involves allocating the costs of the service departments directly to the primary operating departments based on usage percentages. According to the given data, the Library provides 60% of its services to Liberal Arts and 40% to Sciences, with negligible or no direct provision to other departments. The Computing Services Department offers 30% of its services to Liberal Arts and 50% to Sciences, with the remaining 20% potentially allocated elsewhere or unassigned in this context.

The calculation proceeds as follows:

1. Library Department Allocation:

- To Liberal Arts: 60% of $710,000 = 0.60 × 710,000 = $426,000

- To Sciences: 40% of $710,000 = 0.40 × 710,000 = $284,000

2. Computing Services Department Allocation:

- To Liberal Arts: 30% of $240,000 = 0.30 × 240,000 = $72,000

- To Sciences: 50% of $240,000 = 0.50 × 240,000 = $120,000

Summarizing these allocations:

| Provider of Service | Liberal Arts | Sciences | Total |

|----------------------|--------------|----------|--------|

| Library | 426,000 | 284,000 | 710,000 |

| Computing Services | 72,000 | 120,000 | 240,000 |

| Total | 498,000 | 404,000 | 902,000 |

The total allocated costs to Liberal Arts and Sciences are $498,000 and $404,000 respectively. These allocations will help the college assess departmental budgets and resource utilization more accurately, supporting strategic planning and cost control efforts.

Discussion and Implications

The direct method's simplicity makes it attractive for quick allocation, especially when interservice charges are minimal or deemed insignificant. However, it overlooks the mutual services between the Library and Computing Departments, potentially underestimating the true costs allocated to each department. Despite this limitation, the method provides a clear and transparent allocation base, facilitating managerial decision-making.

Application of such cost allocation techniques impacts budgeting, performance evaluation, and resource management. Accurate allocation ensures departments are charged fairly, encouraging efficiency and accountability. For educational institutions like Hudson Community College, understanding the distribution of overhead costs among academic departments informs policy decisions regarding resource sharing and departmental funding.

Conclusion

Allocating service department costs using the direct method offers a straightforward approach suitable for organizations with limited mutual service interactions between service departments. In the context of Hudson Community College, this method effectively apportions costs to the Liberal Arts and Sciences departments based on their respective usage, thus supporting appropriate financial management. Future analyses might consider the step-down or simultaneous methods to capture mutual service effects more precisely, especially as the complexity of departmental interactions increases.

References

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