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Answer the following question in your own words. Your answer must have a 150 minimum word...

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Finance

Answer the following question in your own words. Your answermust have a 150 minimum word count:

  • Describe the three (3) primary methods of cost allocation anddescribe how they differ.

Answer & Explanation Solved by verified expert
4.1 Ratings (623 Votes)
THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS LONDON DEFINES THE COST ALLOCATION AS THE ALLOTMENT OF THE WHOLE ITEMS OF COST CENTRES OR COST UNITS COST ALLOCATION IS A DIRECT PROCESS OF ASSIGNING THE ITEM OF THE OVERHEAD COST OF DEPARTMENT WITH WHICH IT CAN BE IDENTIFIED ALLOCATION OF COST OR OVERHEADS IS POSSIBLE WHEN THE NATURE OF EXPENSE IS SUCH THAT IT CAN BE EASILY IDENTIFIED WITH THE PARTICULAR COST CENTRE METHODS OF COST ALLOCATION 1 DIRECT REDISTRIBUTION METHOD UNDER THIS METHOD OVERHEADS OF SERVICE DEPARTMENTS ARE DIRECTLY APPORTIONED TO PRODUCTION DEPARTMENTS TOTALLY IGNORING THE SERVICES RENDERED BY ONE SERVICE DEPARTMENT TO ANOTHER SERVICE DEPARTMENT THE METHOD IS SIMPLE INVOLVING LESS CALCULATION IT FAILS TO GIVE TOTAL OVERHEAD COST OF OPERATING DIFFERENT SERVICE DEPARTMENTS    See Answer
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Transcribed Image Text

Answer the following question in your own words. Your answermust have a 150 minimum word count:Describe the three (3) primary methods of cost allocation anddescribe how they differ.

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