Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 16

What percentage of service department 1’s costs are allocated to P1 and to P2 under the direct method?

Step 1 of 3

Cost Allocation

Cost allocation begins with identification of costs incurred by the company, aggregating it and then assigning them to respective activities of the concern. These activities can be separate departments, products or cost centres of the company.