Question: What Is The Goal Of Cost Allocation?

What is another word for allocation?

In this page you can discover 29 synonyms, antonyms, idiomatic expressions, and related words for allocation, like: distribution, quantum, assignment, apportionment, dispensation, division, allotment, allowance, dole, lot and measure..

What allocate means?

to set apart for a particular purpose; assign or allot: to allocate funds for new projects. to fix the place of; locate.

What are the three primary methods of cost allocation?

There are three methods for allocating service department costs:The first method, the direct method, is the simplest of the three. … The second method of allocating service department costs is the step method. … The third method is the most complicated but also the most accurate.

What are the four purposes of cost allocation?

The four main purposes for allocating costs are to predict the economic effects of planning and control decisions, to motivate managers and employees, to measure the costs of inventory and cost of goods sold, and to justify costs for pricing or reimbursement.

What does allocated cost mean?

An Allocated Cost is a type of expense that is clearly associated with and so can be readily assigned to a certain business process, project or department. Allocated cost types might include fabrication costs, sales costs, project management costs, and associated fixed costs.

What is the process of allocation?

Allocation definitions The definition of allocation is a process in business and accounting. An example of allocation is when a company portions out their expenses and attributes a certain amount to each division.

What are the four steps in the cost allocation process?

There are four major steps to allocating expenses:Determine program services and supporting activities. … Determine direct and indirect expenses. … Determine proper allocation methods for indirect expenses. … Apply allocation methods to indirect expenses.

What are the different methods of cost allocation?

There are three methods commonly used to allocate support costs: (1) the direct method; (2) the sequential (or step) method; and (3) the reciprocal method. Many instructors choose to defer coverage of the reciprocal method to cost accounting.

What are the theories of the government cost allocation?

COST ALLOCATION THEORY A Cost object is a department, product, or process.  A Common cost is a cost shared by two or more cost objects. …  Cost allocation is the assignment of common, indirect or joint costs to cost objects.  The Allocation base is the measure of activity used to allocate costs.

Why is overhead allocation important?

Overhead allocation is important because overhead directly impacts your small business’s balance sheet and income statement. You have those expenses no matter what, and your accounting system requires you to keep track of them. … Allocating overhead can also help you look for ways to cut your costs.

What is the purpose of cost allocation?

Cost allocation is used for financial reporting purposes, to spread costs among departments or inventory items. Cost allocation is also used in the calculation of profitability at the department or subsidiary level, which in turn may be used as the basis for bonuses or the funding of additional activities.

What does work allocation mean?

Work Allocation is about Managing Tasks Working towards a positive outcome for a project is about two primary things: carefully managing tasks and the people who are expected to do the job.