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Day%201 - Topic 1 Cost allocation I Traditional costing...

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Topic 1 Topic 1 Cost allocation I – Cost allocation I – Traditional costing systems Traditional costing systems
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cost objects cost pools cost drivers overhead rate Allocation of Overheads Allocation of Overheads
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Cost Allocation The process of assigning indirect indirect cost to a cost object Any end to which a cost is assigned Product Line Collection of costs to be assigned to cost objects Method used to assign costs in the cost pool to the  cost objects Department Product Customer 1. Define             Cost Pool Cost Pool 2. Determine       Cost Allocation Rule Cost Allocation Rule 3. Assign Cost Object Cost Object
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Measurement Systems Measurement Systems A predetermined overhead rate is a rate based on estimated data. Budgeted (estimated) cost Estimated activity usage
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Overhead Allocation Rate Overhead Allocation Rate Overhead Cost Cost Driver Rate
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Examples of Unit-Level Drivers Examples of Unit-Level Drivers Units produced Direct labor hours Direct labor dollars Machine-hours Direct material dollars
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