Posts Tagged ‘cost allocation’

Activity-Based Cost: Three Reasons To Avoid It

Activity-Based Cost or ABC has proven itself to be superior over traditional costing methods. Most traditional methods evolved during the early industrial age when life, while more complex than an agrarian culture, was simple. The introduction of computers and modern data processing triggered the rise of ABC giving people the power to manage data driven […]

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Three Cost Allocation Myths

Cost allocation is used in all sorts of business and government enterprises to distribute the money the entity spends to those that “deserve it”. For some, this means that cost incurred by one department should be spread between other departments that benefited from the expense. For others, this means that cost must be distributed to […]

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Fake Cost Drivers for Administrative Overhead

A recent discussion in an online cost modeling forum related to “Which cost drivers can you use to assign administration overheads to a wide product range in a manufacturing concern.” As the discussion evolved, one response said “it is best done through the driver of turnover of the product produced. … because the efforts of […]


Simple Rules for Cost Allocation

Invariably, when the subject of costing comes up, the discussion evolves to a discussion of possible allocation bases, or ways that cost can be distributed to products. However, this polite discussion often degenerates into arguments (could we say battles) over who’s doing what to whom with product cost.


How to Allocate Information Technology Expense?

With today’s technology trends, Information Technology or IT has become much more significant to business operations. In the past, the cost of IT was a small, almost trivial, share of overhead. Now IT has become a significant part of corporate overhead. No longer trivial, businesses now want to know how to relate IT to products […]