Question

How might companies use cost allocation to manage their companies?

Answer 1

Cost allocation is process of identify , accumlate & assigning costs to costs objects such as products, department , Functions or any other way to allocate. its require indentify the cost objects in a company, identify the cost incurred by cost objects and then assign cost to the cost object by specify criteria.

The benifit of cost allocation is it help making decision easier , provide exact product P&L in the companies to analyse the final net income genrate by a product and help evaluate and motivate the staff as well.