ADM 3346 Lecture Notes - Lecture 9: Variable Cost, Fixed Cost, Opportunity Cost
12 Jan 2016
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Q4: analyze cost-allocation procedures to apply common costs and justify contractual reimbursement. Provide information for economic decisions: motivate managers and other employees, measure gaap-compliant income and assets for reports to external parties. Justify costs or reimbursement amounts internally or externally. Justification of relevance: causality, benefits received benefits received. A direct cause-and-effect relationship of one business function cost driver to the quantities consumed by user business functions. The beneficiaries of the services provided are charged with costs in proportion to the. If the parties believe the process is undertaken in good faith among all who may be affected and they have equal access to relevant information, the outcome will be perceived as fair. Costs are allocated in proportion to the cost object"s ability to bear them. Generally, larger or more profitable objects receive proportionally more of the allocated costs. Allocating support costs to operating departments: direct method. The most widely used method of allocating support department costs.
