BUSI 601 Chapter Notes - Chapter 7: Financial Accounting Standards Board, Financial Statement
12 Sep 2016
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Chapter 7: cost allocation departments, joint products, and by products. Service department: a unit of the organization that performs one or more support tasks for production departments. Joint cost types: the costs of production departments and service departments shared by two or more different products, the joint manufacturing costs for products that are not separately identifiable until some later point in the manufacturing process. Provide the right incentive for managers to make decisions that are consistent with the goals of top management. Fairly determine the rewards earned by the managers for their effort and skill and for the effectiveness of their decision making: cause and effect relationship, ability to bear. Volume based approach: overhead costs could be allocated to products in a single step, using a single overhead rate. Departmental approach: takes into account differences in costs incurred in the different departments and differences in consumption of the department"s resources by the products, thus leading to more accurate product costs.
