Indirect cost rate is equal to Indirect Cost Pool divided by Indirect Cost Allocation Base.
Indirect cost rate is equal to Indirect Cost Pool divided by Indirect Cost Allocation Base.
Because in ABC costing overheads are allocated based on activities performed by departments rather based on any rate or formula that's why as much activity any department perform as much cost will be allocated which is more accurate way of allocation.
Apportion means to assign cost based on a predetermined formula. For example, we would apportion a cost pool if the assignment of the cost was based on fixed amounts (e.g.,10 percent to cost objective one and ninety percent to cost objective two) or a three factor formula (e.g., a weighted average of sales, payroll, and asset value). In both cases the assignment of the cost is based on some predetermined method. Allocation means to assign cost on a rate or factor bases that attempts to assign cost using an allocation base that best measures a causal or beneficial relationship between the cost pool and the final cost objective.(e.g., direct labor hours, machine hours, etc.),
no
Indirect cost rate is equal to Indirect Cost Pool divided by Indirect Cost Allocation Base.
Indirect cost rate is equal to Indirect Cost Pool divided by Indirect Cost Allocation Base.
Because in ABC costing overheads are allocated based on activities performed by departments rather based on any rate or formula that's why as much activity any department perform as much cost will be allocated which is more accurate way of allocation.
Apportion means to assign cost based on a predetermined formula. For example, we would apportion a cost pool if the assignment of the cost was based on fixed amounts (e.g.,10 percent to cost objective one and ninety percent to cost objective two) or a three factor formula (e.g., a weighted average of sales, payroll, and asset value). In both cases the assignment of the cost is based on some predetermined method. Allocation means to assign cost on a rate or factor bases that attempts to assign cost using an allocation base that best measures a causal or beneficial relationship between the cost pool and the final cost objective.(e.g., direct labor hours, machine hours, etc.),
no
Cost objectives determines the cost allocation. It determines the product, service or department that will receive the allocation.
Yes, it is. When used for allocating costs, a cost driver is often called a cost-allocation base
Predetermined overhead rate = Est. total Manuf. Overhead Cost / Est. total amt of allocation base In this case, allocation base would be direct labor (as opposed to machine labor). Hope this helps
allocate cost arbitrarily
Cost allocation allows a company to determine the amount each item produced will cost. An effective cost allocation will be able to track down the shared costs of production not only to the divisions but also to the products and customers that use those costs.
The following are the differences between allocation and apportionment. 1. Allocation costs are directly allocated to cost centre. Overhead which cannot be directly allocated are apportioned on some suitable basis. 2. Allocation allots whole amount of cost to cost centre or cost unit where as apportionment allots part of cost to cost centre or cost unit. 3. No basis required for allocation. Apportionment is made on the basis of area, assets value, number of workers etc.
Yes, there is a formula for calculating labor cost, which is: Labor Cost = Number of Hours Worked x Hourly Rate This formula can be adjusted depending on additional factors like overtime or bonuses.