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Cost allocation is a process of providing relief to shared service organization's cost centers that provide a product or service. In turn, the associated expense is assigned to internal clients' cost centers that consume the products and services.
Direct labour and materials are relatively easy to trace directly to products, but it is more difficult to directly allocate indirect costs to products. Where products use common resources differently, some sort of weighting is needed in the cost allocation process. The cost driver is a factor that creates or drives the cost of the activity ...
The third step is to compute the predetermined overhead rate by dividing the estimated total manufacturing overhead costs by the estimated total amount of cost driver or activity base. Common activity bases used in the calculation include direct labor costs , direct labor hours , or machine hours.
An important part of standard cost accounting is a variance analysis, which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate action to ...
A cost centre is a department within a business to which costs can be allocated. The term includes departments which do not produce directly but they incur costs to the business, [1] when the manager and employees of the cost centre are not accountable for the profitability and investment decisions of the business but they are responsible for some of its costs.
An asset depreciation at 15% per year over 20 years [1] In accountancy, depreciation refers to two aspects of the same concept: first, an actual reduction in the fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation in accounting statements of the original cost of the assets to periods in which the assets are ...
Today's term: asset allocation. ... Given the inflation we've experienced between just 2000 and 2012, something that cost you $100 in 2000 would cost you about $132 today. Dollars stashed in a ...
For example, if Ann is a general partner of ABC partnership, Ann's tax basis in the partnership may be increased if the partnership borrows money. Special allocation rules for debt vary, depending on whether the debt is considered to be recourse or non-recourse to the partners in a partnership.