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Acct 102 Chap 4 - machine hours Cost objects are...

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Acct 102 – Chap 4 Allocation is the process of dividing a total cost into parts and distributing the parts among the relevant cost objects. Allocation base is the cost driver that constitutes the basis for the allocation process. To calculate the allocation rate take the total cost to be allocated and divide it by the appropriate cost driver. Cost Accumulation measures the cost of a particular object by combining many individual costs into a single total cost. Cost allocation is the process of dividing a total cost into parts and assigning the parts to relevant objects. Cost distribution is another name for cost allocation . A cost driver is any factor that has a cause and effect relationship with a cost object. Typical cost drivers include floor space, number of units, sales volume, sales dollars, number of departments, direct labor hours, direct labor cost, direct material usage and
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Unformatted text preview: machine hours. Cost objects are objects (such as products, processes, departments, services, activities, etc.) whose costs need to be determined by management. Cost tracing relates specific costs to the objects that cause their incurrence. Direct costs are easily traceable to a cost object in a cost-effective, economically beneficial manner. Indirect costs cannot be easily traced to a cost object in a cost-effective, economically beneficial manner. Joint Costs are common costs incurred in the process of making two or more products. Predetermined overhead rates are determined before the actual overhead costs and actual cost driver are known. Formulas to Review Predetermined Factory Overhead Rate = Total Estimated Factory Overhead Costs/Estimated Activity (Cost Driver) Allocation rate = Total cost to be allocated/Cost driver...
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