It is relatively easy for a computer to solve the

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Unformatted text preview: _________________________________________________________________________________________________________ David W. Young • Management Accounting for Managers • Chapter 1 Page 11 Copyrighted Material. Do not reproduce without written permission. This terminology can be confusing, since allocation is sometimes called apportionment and vice versa. Moreover, the terms distribution, allocation, and apportionment occasionally are used interchangeably. In addition to these terminology differences, service center costs that are allocated to revenue centers are often called indirect costs. The context usually clarifies the meaning, but, because of these terminology differences, it is important to understand the processes being used rather than attempt to memorize the meanings of the terms. In summary, before we can allocate service center costs, we must (1) determine the direct costs of each cost center, (2) distribute indirect costs to the appropriate cost centers, and (3) choose a basis of allocation for each service center. We then are ready to allocate servic...
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