On the allocation of fixed and variable costs from service departments*

Bala V. Balachandran, Lode Li and Robert P. Magee

Contemporary Accounting Research, 1987, vol. 4, issue 1, 164-185

Abstract: Abstract. In this paper, a service department chooses a fixed/variable cost combination based on the forecasts of two operating departments. The operating departments then make service usage decisions, and the service department provides the level of service demanded. The allocation of fixed and variable service department costs is used to: (1) encourage efficient short term use of the service and (2) encourage accurate forecasting by the operating departments. Three approaches are used to achieve these objectives — incentive compatible allocations, a modified Soviet incentive scheme, and a Groves allocation scheme — and we discuss conditions under which these schemes are successful. Résumé. Dans cet article, un atelier de service retient une combinaison de coûts fixes/ variables fondée sur des prévisions de deux ateliers de fabrication. Par la suite, les ateliers de fabrication prennent des décisions relatives à leurs besoins de services, et l'atelier de service fournit le niveau de service exigé. La répartition des frais fixes et variables de l'atelier de service vise à : (1) favoriser une utilisation efficace de l'atelier de service à court terme et (2) favoriser l'élaboration de prévisions précises de la part des ateliers de fabrication. Trois approches sont utilisées pour atteindre ces objectifs — la compatibilité des répartitions et des mesures incitatives, un système incitatif soviétique modifié et un système de répartition de Groves — et nous examinons les conditions nécessaires au bon fonctionnement de ces systèmes.

Date: 1987
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Citations: View citations in EconPapers (6)

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https://doi.org/10.1111/j.1911-3846.1987.tb00661.x

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Persistent link: https://EconPapers.repec.org/RePEc:wly:coacre:v:4:y:1987:i:1:p:164-185

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