¶ … Allocation
Keeping track of the costs is a crucial part of running a business. Cost allocation is assigning common costs to several cost objects. Cost allocation methods are used as a management accounting tool that helps in getting an accurate idea of costs that are associated with various departments in an organization. Proper cost allocation is an important element in making sure that any organization is run efficiently and cost effectively. There are different cost allocation methods that can be used in an organization. The common cost allocation methods are direct allocation method and the step-down method (Monico, & Fiertz, 2002).
Direct allocation method
This is the most popular method that is used for cost allocation. It involves the allocation of all service departments cost to the production department and does not factor in the fact that the service department offers services to other departments. The costs of manufacturing service department are therefore directly allocated to the production department of the company and to the product...
K-Swiss Inc. Allocated Costs K-Swiss has operations on numerous continents with multi-level departmental responsibilities for product and brand management. K-Swiss (2010) divisions create and manage product and thus acquire allocated costs associated with the manufacture and sale. "Adidas and Reebok -- and to a lesser extent New Balance and K-Swiss saw big increases in orders from Foot Locker, Adidas, Reebok and K-Swiss all report robust sales and big increases in their
Even the lowest-level managers and employees are empowered to make decisions and have that valued democratic voice. ADVANTAGES: An advantage of this form of measurement is that it tends to be more encompassing, since it accounts for all uses of capital. It is susceptible to manipulation by managers with a short-term focus, or by manipulating the hurdle rate used to evaluate divisions. The frequently occurring problem, in concern to a lack
Stadium Jumps" the writers discuss the cost of building a baseball stadium and renovating Robert F. Kennedy memorial stadium in Washington, D.C. The cost analysts note that the original cost estimate for the project was too low, and that the actual costs of completing the project could be as much as $91 million dollars more than originally anticipated. D.C. councilmen overseeing the project expect that the total costs for
Joint costing systems should bear in mind the legal constraints on the use of such systems, and should provide accurate information to managers in order to be most useful in the managerial accounting context. Firms need to remain competitive, which indicates that the market will set prices to some degree. This implies that firms can make better decisions with respect to what projects/products they wish to pursue by understanding the
Another example of pure job costing is web development, where the processes themselves vary hugely from project to project, meaning the cost and time involved also varies. Response Dosch & Wilson (2010) do seem to do a good job of defining job and process costing, and the person who posted this seems to have understood these definitions fairly well in the abstract -- that is, the definitions provided seem reasonable and
Treatment of Costs Allocation for CISCO CISCO is an organization that designs, manufactures, and sells Internet Protocols (IP)-based networking. To satisfy the customer needs, CISCO also designs custom products tailored to the customer's specifications to assist them in reducing costs, improve productivity and gaining competitive advantages. Since CISCO designs and manufactures wide range of products, the company is required to allocate costs to its products and services to improve decision and
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now