Allocation costs - Managerial Accounting Allocation cost Activity-Based Costing Content Definition Main stage Traditional and ABcosting Example Cost

Allocation costs - Managerial Accounting Allocation cost...

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Managerial Accounting Allocation cost, Activity-Based Costing
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Content Definition Main stage Traditional and ABcosting Example
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3 Cost classifications for assigning costs A direct cost is a cost that can be easily and conveniently traced to a particular cost object (product: direct materials and direct labor) An indirect cost is a cost that can not be easily and conveniently traced to a particular cost object (product: manufacturing overhead) Tracing costs directly to departments or products facilitates responsibility accounting.
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Purpose of cost allocation Economic decisions for recourses allocation -to decide how to allocate available capacity among product; Motivation- to decrease the rate of corporate overhead; Income and asset evaluation for external users- to define a cost per unit for statements. Cost justification or reimbursement - to develop a “fair” price.
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The general process of allocation Choosing the cost objective ( product,
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