Module Name
Cost Accounting Level -1
Module Code
AC 02-1
Assessment No.
I Weighting 40 %
Assessment Type:
INDIVIDUAL
STUDENT MCUC NUMBER:
Please note that a grade will only be given to those whose student number is noted on this form. Please ensure that the student numbers from all group members are recorded accurately.
2012868
Submission Date:
3rd Dec 2013.
MODULE TUTOR:
Umar Farooq Awan
DECLARATION
The work contained in this assignment is my own and that all materials and sources used have been acknowledged.
I/We have not copied or colluded in part or in whole, or otherwise plagiarised …show more content…
A few features concerning to the importance of cost allocation comprise staying on budget, estimating goods to meet profit goals, and tracking unproductive operations. Various methods are available depending on a company’s working. It is required by Third Party reimbursements -Rate regulated industries -Governmental subsidies -Cost plus contracts, External Reporting/Taxes -FASB and IRS requires allocation, Costing products accurately is important. -Decision Making -Control.
The importance of cost apportionment is that items of indirect costs residual to the process of cost allocation are covered by cost apportionment. It is accurate as it assigns expenses with policy according to factors like real use.It helps in controlling overhead cost, calculating of cost of production, analysis of under or over absorption, calculating of work in progress goods.
WORKING-
INDIRECT WAGES=CUTTING DEPARTMENT=3500*2500/10000 =875
CURRENT METHOD
Particulars
Cutting
Assembly
Finishing
Total
DISTRIBUTION OF COST …show more content…
It often leads to tension and disagreement among managers as no one can conclude and get the "RIGHT ANSWER".
Additional challenges arise when multiple service centers use each other’s services choice of apportion base – determination of costs to be allocated). Even assuming all allocated costs are relevant and the apportion base is well specified, this presents a difficult goal to achieve.
In a “real world” setting, most firms are faced with apportioning the costs of a very large number of service centers (i.e., the manufacturing department alone might apportion costs for maintenance, engineering). However, for simplicity, this example also uses only two service centers (Electricity and Water) and two profit centers (Cars and Trucks).
Service center estimates overhead by apportioning in which bases are kilowatt hours and gallons and service center usage. It is essential to note that the service centers are consuming their own services as well as the services of the other service