To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
To assign costs to a product, department, customer, etc. on an arbitrary basis. For example, the heating cost might be allocated to the five departments located in the area that is heated. The allocation is often based...
Why is it necessary to allocate a lump sum payment to individual items? It is necessary to allocate a lump sum payment to individual items in order to record a fair portion of the lump sum in each of the proper general...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
the appraisal amounts as a logical way to divide up the cost of $220,000 between land and building. Here is one approach: Assign or allocate $44,000 to the account Land. This is 20% of the $220,000 cost. Assign or...
In activity-based costing this refers to the allocation of costs to activities. For example, allocating the costs of setting up the manufacturing equipment to run a batch of product to the activity “setup...
What is cost allocation? Definition of Cost Allocation Cost allocation is the assigning of a cost to several cost objects such as products or departments. The cost allocation is needed because the cost is not directly...
An allocation of indirect costs based on the units of production, the number of machine hours, the number of labor hours, etc.
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
In activity-based costing this refers to the allocation of the cost of activities (determined by stage 1 allocations) to the cost objects such as products or services.
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
of $__________ from the three service departments. 23. Assume the step method is used to allocate the service department costs in the following order: S1, S2, S3. The amounts allocated to the other departments from S1...
A factory or manufacturing overhead rate used to allocate, apply, assign, or spread indirect product costs to items manufactured. Under traditional cost accounting, the burden rate might be a percentage of direct labor...
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
The allocation of common costs based on the sales value of the products that emerge. For example, a company develops a large parcel of land at a cost of $5 million dollars. Individual lots will be sold for $100,000 to...
costs. To avoid the death spiral, some companies attempt to allocate overhead costs based on activities and product complexities rather than simply spreading them on production machine hours. Also, some companies do not...
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
a profit for the company’s owners. If a company never has inventory at the end of the accounting periods, the allocation of manufacturing overhead could be avoided. The reason is that all of the manufacturing costs...
, and so on. To allocate these special costs to all products on the basis of the number of production machine hours (instead of allocating those costs based on their root causes) will result in individual product costs...
. True Wrong. SG&A and interest expenses are not allocated to inventories for financial reporting under generally accepted accounting principles. (Management might allocate these expenses internally to assist in...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
What is the major weakness of the traditional method of allocating factory overhead? Definition of Traditional Method Allocating Factory Overhead The traditional method of allocating factory overhead (manufacturing...
What is a plant-wide overhead rate? Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to allocate or assign a company’s...
, etc. The manufacturer has 40,000 production machine hours. Using the traditional method of cost accounting, the company will allocate or assign $50 of overhead of each machine used to produce the output. Applying $50...
. The appraised value is an attempt to determine the property’s current market value. The appraisal report for real estate will usually report the appraised value of the land separate from the appraised value of the...
, the company will apply, allocate, or assign overhead to the goods manufactured using a predetermined overhead rate of $50 ($800,000 divided by 16,000) for every production machine hour used. Since the future overhead...
What is a predetermined overhead rate? Definition of Predetermined Overhead Rate A predetermined overhead rate is often an annual rate used to assign or allocate indirect manufacturing costs to the goods it produces....
the more likely that additional factors will be needed to properly allocate costs. More Right! The more diversity of products and customers the more likely that additional factors will be needed to properly allocate...
What does it mean to amortize the premium, discount, and issue costs on bonds payable? Definition of Amortize Premium, Discount, and Issue Costs With regards to bonds payable, the term amortize means to systematically...
inventories and cost of goods sold contain $2 per pound for the materials and its materials purchase price variance account contains an unfavorable variance of $600,000 [1,000,000 X ($2.60 – $2.00)]. To comply with...
because the company has to allocate the depreciation to the three versions of the product line that are processed in the Finishing Department. Let’s assume that the allocation is based on the amount of the...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
net realizable value at the split-off point and then to __________ __________ __________ __________ the common costs that will be allocated to the joint products. Select... add that amount to deduct that amount from 16....
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