Cost Accounting and Allocation Report for University Departments

This report addresses the allocation of costs between university departments, specifically focusing on the Bachelors and Masters programs. It emphasizes the need for a financial plan that accounts for expenditures related to the cafeteria, library, and career placements, all of which are utilized by students from both departments. The report suggests allocating costs based on student usage rather than departmental lines, advocating for activity-based costing to avoid irrelevant costs. The Dean should allocate the cost of the cafeteria on student basis, the cost of placement services to the students using these services, and the library cost through library cards, to ensure fairness and accuracy in cost allocation. The report references studies on variable activity-based costing and product mix decisions using time-driven activity-based costing to support its recommendations, stressing the importance of avoiding costs not directly related to the departments.

cost accounting

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By student name
Professor
Date: 05 September, 2017.
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In the quest to allocate the cost between two departments that is the Bachelors and the
Masters Program, the Dean should first make a financial plan on the total amount of expenditure that
will be incurred in relation to the cafeteria, library and career placements. Students from both the fields
are using these services so cost should be adequately allocated between the two departments. First the
total number of students from both the departments must be calculated. Post that cost allocation
should be done; taking into consideration the theories of the activity based costing. In case of activity
based costing, total cost is allocated on the base of the activity drivers in all cost center and not on the
source of cost drivers , which lead to allowance of irrelevant costs that are not related to the
department or the system (Zhuang & Chang, 2017). Hence the Dean must allocate the costs on the basis
of the activity costing, the total cost of the cafeteria can be divided between the students and the cost
of placement services can be charged form the students who are using these services. Hence in that
case cost will be allocated accordingly. In case of library since it can be used by all the students when
and how they want, than library cards should be made for the students in return of certain money and
hence each student is paying for their own usage of the library card and on the source of the same the
cost will be allocated. Hence these are the few ways by which the dean can allocate the money between
different departments, when they are using the same service. The main idea is to divide the same on
student basis rather on department basis. Hence that will help in allocation of the total cost accordingly.
If the Dean wants to allocate the cost department wise it will lead to a lot of irrevocable costs that are
not even related to the said department (Geiszler, Baker, & Lippitt, 2016).
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References
Geiszler, M., Baker, K., & Lippitt, J. (2016). Variable Activity-Based Costing and Decision Making. Journal
of Corporate Accounting & Finance , 28 (5), 45-52.
Zhuang, Z., & Chang, S. (2017). Deciding product mix based on time-driven activity-based costing by
mixed integer programming. Journal of Intelligent Manufacturing , 28 (4), 959-974.
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