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Explain why some production costs must be assigned to products through an allocation process?

Explain why some production costs must be assigned to products through an allocation process?

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Answer. Since some production costs are incurred on producing varios products which have been processed through various departments, so as to calculate the correct relevant costingof that prouct, the product cost need to be allocated through an allocation process in place.

There can be various allocation process like traditional costing in which entire production cost is divided between products on single cost driver, whereas in ABC costing process there are varios cost drivers for each cost activity being associated with production activities and therefore dividing production costs among products on basis of their actual usage of resources in that prodcing activity.

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