About This Chapter
Manufacturing Overhead Cost Allocation - Chapter Summary and Learning Objectives
Cost allocation can be beneficial for companies. Managers must understand these benefits as well as the different methods used in cost allocation. This chapter compares the methods of and reasons for cost allocation. With brief video lessons, instructors focus on examples of different methods and analyze important terms. Quizzes can be found in each lesson and are there to help you measure your understanding of the material. The lessons in this chapter cover:
- What cost allocation is and the terms associated with it
- The purposes and reasons for cost allocating
- How to apply different methods for allocating costs, including the direct method and the step-down method
|Cost Allocation: Definition, Terms & Examples||Assess examples of how costs are allocated and how this benefits companies.|
|Cost Object: Definition & Examples||Consider cost objective and learn about examples.|
|The Three Purposes of Cost Allocation||Focus on the reasons for allocating costs and give examples.|
|Cost Allocation of Service Departments||Analyze the three main reasons for allocating costs.|
|Direct Method of Cost Allocation: Process, Pros & Cons||Break down the advantages and disadvantages of this method.|
|Step-Down Method of Cost Allocation||Explain the step-down method of allocating cost and outline its limitations.|
|Reciprocal Distribution Method of Cost Allocation||Evaluate the processes for allocating cost with the reciprocal distribution method.|
1. Cost Allocation: Definition, Terms & Examples
Have you ever wondered how a business determines costs? In this lesson we will learn about cost allocation. We will define the term and apply it to some examples. The lesson will conclude with a summary of key concepts.
2. Direct Method of Cost Allocation: Process, Pros & Cons
While the direct method of cost allocation may be the easiest for the accounting department to use, this lesson will outline the process and show how it is often inaccurate in truly spreading the burden of overhead costs among different groups.
3. Step-Down Method of Cost Allocation
The step-down method of cost allocation lets accountants do something that some other forms of cost allocation won't: allocate overhead costs to service departments. However, it's still not a perfect system.
4. Reciprocal Distribution Method of Cost Allocation
The reciprocal distribution method of cost allocation solves one of the primary issues in cost allocation: how to allocate costs between service departments. This lesson teaches how to use the method.
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Other chapters within the Accounting 301: Applied Managerial Accounting course
- Corporate Governance for Managerial Accounting
- Financial Statements & Balance Sheets
- Cost Classifications
- Job Order Cost System
- Process Cost System
- Activity-Based Costing
- Cost-Volume-Profit Analysis
- Decision Making in Managerial Accounting
- Pricing Objectives & Methods
- Budgetary Control
- Standard Costs
- Capital Budgeting
- Statement of Cash Flows
- Financial Statement Analysis
- Software for Managerial Accounting
- Required Assignments for Accounting 301
- Studying for Accounting 301