Now we will reallocate indirect costs from service pools to product pools. So that will be, Cost allocation two reallocation. So and the idea is, again like I said, service pools, To product pools. This is our goal here. Well, let's start with the real estate reallocation, real estate reallocation. Well it's you know that we have to realize what the cost base here is, and the cost base for real estate, and actual cost base is the manufacturing area. So we basically say that all other four pools, general and three product pools, they occupy some manufacturing area. So we take the amount initially allocated for the real estate pool and reallocate that proportionally to this manufacturing area. Well, let's see how this goes. So, pool, Now, we said that the cost allocation base, cost allocation base, this is the share of manufacturing area. And this is percentage and then cost of real estate reallocated. Let's see how this table would work. Well, it's actually a very simplistic thing so that's what we have here. Well, now here we have only four pools remaining, we have general, we have badges, we have clips, and we have assembly. And let's say that we look at what is the proportion of area. And we found out that this is 10% here, 40% for badges, 30% for clips, and 20% for the assembly. Clearly, you can see that the total here is 100%. And these are totals, but see what happens. Now, we know that, what was the amount that we want to reallocate, that was $6,200. Now we take these proportions and then we reallocate 10% of that to general. So now this is 620, this is 2,480, 1,860, and then finally 1,240 and the total clearly is 6,200. So see what happened, we took these numbers. We calculated them on the basis of the cost allocation base and now after this stage, there are no longer indirect costs associated with real estate. Real estate pool has disappeared, now have only four. And for these four, we had previously allocated and then we have to add these amounts. Well, let’s proceed because we would also like to remove the general pool. Well, so now general pool reallocated. The base here is cost allocation base. This is the share, Of direct costs. Associated with the, so we have general and three product pools. So for all these three product pools we say that the best base for them is the share of direct costs. So we take the amount that now is associated with the general pool. The previously allocated one plus the share that we reallocated from real estate and then we proportionally reallocate that. Again, there is a table pool. Base, this is the share of direct cost percentages, and then total cost in dollars. See what happens. Well, the good news is that now we have only three pools remaining, badges, clips, and assembly, and we have total. Now, the numbers that I'll put here, they again, these numbers, the 55% in badges, 40% in clips, and 5% in assembly, the total of 100. Again, these numbers, where do they come from? So people say that the proportional share of direct cost here with likes this including raw materials and labor. And then we'll say, great, so you can see that most of the requests here in the badge manufacturing. Now, we take the total amount. Now, what is the total amount that we are redistributing? Initially, in general, it was 10,000 and then, plus 620 that arrived from the previous page. So the overall amount is $10,620. And clearly so we take this amount multiply by these percentages and then we get unfortunately the numbers here are not around it. So it's 5841, 4248 and then 531 and the total clearly is 6 is 10,620. So see what happens. Now, and this is important, we have no more service pools. Well, that's kind of cool. So we have to, Here in this final table, I will show to you exactly what happened. Again, the table goes like this. It's a full page table, but that is kind of important for us to take a look at. So I will first produce this table and then we will be able to see what's going on here. All right, so these are components. So this is sort of is a summary table of reallocation. Now, and these are totals, and these are service pools. And these are, we use blue here product pools. And this summary table goes like this. So here we had real estate and general, and here we had badges, clips, and assembly. Now these first two lines, these are reallocations. Let's say this is real estate reallocation. So we know that initially it was 6,200, so here it's negative 6,200, that goes to 620 here, 2,480 here, 1860 and 1240. So see what happens. That was the process of first reallocation. We subtracted that and effectively removed this cost pool and now we charged part of that to general and then others to badges, clips, and assembly. Now the next thing is that general reallocation. Now you can see that here, for real estate, there is nothing already. So we have here negative 10,620. And then we reallocate that and get this 5841, 4248, and then 531. Well, see what happens, I will put here in red total indirect costs. Now, this is, we just summed that together so it's 8,321, 6,108, and 1,771. But these are total indirect costs only for, this is for service pools, and this is 16,200. Now what do we have to do? Remember, in the previous episode, I circled some of the blue numbers. So these were indirect costs charged to the product pools and here I will reproduce them. So those will be 11,000, 4,300 and 1,500. And that gives us the final numbers and that will be 19321, 10408 and 3271. So this is what we finally did. At this point, of the sum will be clearly that will be 33,000. So, in this step down, sort of cumbersome, process, we finally associated or allocated all of the direct costs to the product pools, to B, C, and A. Now, what else do we need? Now, we have to find the cost allocation base for all these pools, and then calculate the important parameter that has a very special name. That's called the cost allocation rate. So we will sort of ascribe to all these pools some number that later we'll be able to use in order to find the actual overhead amount charged to this pool if we changed this number. Well, in the next episode we'll talk about that.
