Identification of costs with cost objectives, also called
cost apportionment,
cost assignment,
cost distribution, and
cost reapportionment. There are basically three aspects of cost allocation: (1) choosing the object of costing. Examples are products, processes, jobs, or departments; (2) choosing and accumulating the costs that relate to the object of costing. Examples are manufacturing expenses, selling and administrative expenses, joint costs, common costs, service department costs, and fixed costs; and (3) choosing a method of identifying (2) with (1). For example, a cost allocation base for allocating manufacturing costs would typically be labor-hours,machine-hours, or production units.
Dictionary of Accounting Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
