Indirect cost is those costs that cannot be directly assigned to/related to/identified with a particular cost center or cost object, but they benefit multiple cost objects. It is not possible to calculate them for a single cost object. However, it needs to be apportioned over various products as well as among the different departments of … Read more
A cost that is easily attributable to a cost center is known as Direct Cost. When all the direct costs are taken together they are known as prime costs. Example: Direct Material, Direct Labor, Direct Expenses. The cost that can be directly attributable to/identified with/ associated with the specific cost center or cost object like … Read more
When the cost items cannot be directly charged to or accurately traceable to a particular cost center, then such items of cost are prorated amongst various cost centers, on an equitable basis, this process is known as cost apportionment. It is the distribution of different items of cost in proportions to the cost unit or … Read more
Allocation of cost, implies the entire distribution of the overhead item to the departments on a logical basis. It represents that part of cost attribution, which charges a particular cost to a cost unit. Allocation of cost is directly assigned to the particular cost center. Cost Allocation, as the name suggest, is the direct allotment … Read more