About This Chapter
Service Department & Joint Cost Allocation - Chapter Summary
This chapter covers service department and joint cost allocation. Brief text and video lessons address a variety of cost allocation methods as well as pricing formulas and cost-benefit analysis. As you make your way through the comprehensive lessons in this chapter, assess your progress by using the lesson quizzes. These multiple-choice quizzes gauge your knowledge of definitions, concept applications, terms, and problem-solving. After completing the chapter, you'll be prepared to do the following:
- Describe the terms associated with cost allocation
- Identify the steps for the direct method of cost allocation
- Define the step-down method of cost allocation
- Explain when to use the reciprocal distribution method
- Use the formula to determine cost-plus pricing
- Measure the accounting rate of return and payback via cost-benefit analysis
- Summarize the cost classifications listed on the goods and inventory statements
- Point out the different types and methods used for inventory cost calculations
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.
5. Cost Plus Pricing: Definition, Method, Formula & Examples
How do you determine the retail sales price of your product or service? There are many strategies you can apply to set a price. This lesson will introduce you to the cost-plus pricing strategy.
6. Cost-Benefit Analysis: Payback & Accounting Rate of Return
In business, there are a variety of methods used to calculate the expected return on an investment. In this lesson, we'll discuss two common methods: payback period and the accounting rate of return.
7. Cost Classifications on Goods & Inventory Statements
Manufacturing companies convert raw materials into finished goods that are sold to consumers. Inventory in various stages of completion must be reported on company financial statements.
8. Inventory Cost: Definition, Methods & Types
Have you ever thought about how much it costs a business to keep inventory in stock? It's not just the price the business pays for the items that it keeps in stock. It is so much more. In this lesson, we will discuss exactly what constitutes actual inventory cost.
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Other chapters within the Accounting 303: Cost Accounting course
- Cost Classifications in Accounting
- Costing Methods & Techniques
- Formulas for Cost Accounting
- Standard Costs in Accounting
- Job Order Cost System in Accounting
- Process Cost System in Accounting
- Activity-Based Costing Overview
- Product & Service Costing
- Budgetary Process
- Cost Behavior Analysis
- Cost-Volume-Profit Analysis Overview
- Cost Estimation
- Cost Accounting for Decision Making
- Ethics in Cost Accounting
- Modern Trends in Accounting
- Required Assignments for Accounting 303
- Studying for Accounting 303