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Please write a short report (not more than 600 words) concerning the allocation of indirect costs...

Please write a short report (not more than 600 words) concerning the allocation of indirect costs using plantwide, department, and ABC rates.

The report should focus on the following:

The nature of each

advantages and disadvantages.

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Homework Answers

Answer #1

Allocation of Indirect cost Using Following methods

1.ABC Rates

Advantages

a.Determine the product margin more effectively

b.Determine which process cost is unneccessary and Wasted cost.

Disadavtages

a.costs more to accumulate And Analyise information

b. data produced by Abc conflict with mangerial And Tarditional costing methods

2. Deparment rates

Advantages

a. it helps the management quicker decision making with Reagards to cost in line

b. it easy to find the cost of diferent products manfctured by company

Disadvantages

a. it Creates redundancy because of different products manufactured by company

b. Assumes that depatmental o.H proprtional to Allcoation cost

3. Plant wise

Advantages

a.information is readily Availble

b.Easy to implement

Disadvantages

a.O.H cost May not Bear with Direct labour cost

b. All Products may not use o.h cost same portion

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