Exam 2 Flashcards
Single Rate Allocation:
Allocation all Indirect costs using a single ‘predetermined overhead allocation rate’ based on expected cost pool and expected volume of cost driver
Multiple Allocation Bases:
Break indirect costs into individual cost pools based on most appropriate cost drivers and then allocate costs to cost objects using these mulitple rates and allocation bases
Dual-Rate Allocation:
Separates Indirect costs into 2 cost pools (variable and fixed) and allocates each pool using a different allocation base.
Two-Stage Cost Allocation:
Allocating costs into intermediate cost pools (each with its own allocation base and allocation rate), then allocating to individual cost objects using the respective allocation base.
Multiple Allocation Activities:
Subset of two-stage allocation, where we identify two or more cost pools and activities to allocate indirect costs (example: machine hours and Direct Labor)
Departmental 2-stage cost allocation:
General plant costs area allocated to individual departments, added to department specific costs to establish intermediate department cost pools. Each department allocates costs to cost objects using department specific rates and drivers.
Manufacturing overhead
The value of indirect production costs
Cost object
The item for which data is being analyzed
Cost pool
The total value of the indirect costs that must be allocated to different cost objects
Allocation base
(Activity or cost driver) used to assign MOH to various cost objects
Allocation rate
(Overhead rate) A rate used to charge MOH cost to the cost objects
Predetermined overhead rate
An allocation rate established in advance for each period based on managements expectations for overhead and activities
Plantwide overhead rate
POHR that can be used to allocate overhead to various product lines or departments
Incurred overhead
Those overhead costs actually incurred throughout the period
Applied overhead
Those overhead cost applied to different jobs. Based on the POHR and cost driver usage
