ACTG 4400 Chapter Notes - Chapter 6: Linear Equation, Marginal Cost, Operating Margin
17 Dec 2016
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Called operating expenses expensed when occurred. Cost allocation of these costs is different because they are non-inventoriable costs. Non-manufacturing support costs: selling, marketing, hr, it, customer service etc. But process of finished output must recover all manufacturing and non-manufacturing costs. : select best cost assignment method to each distinct output that most accurately includes value added. Cost allocation is alternative used when tracing is not economically feasible. Must select observable and countable input to signal different levels of value added. Allocate period costs of non-manufacturing activities proportional to different levels of benefit provided to each of the users. Activities of upstream and downstream functions often interdependent. Upstream activities incur pre-production costs (r&d, design, etc. ) Downstream activities incur post-production costs (marketing, customer service, distribution etc. ) Sometimes downstream costs can be reduced by spending more on upstream functions. Period cost allocation exists to account for this reciprocity.
