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Task:

At a high level, the cost allocation process for indirect costs to an individual product (cost object) is as follows:

Step 1: Identify total indirect costs and the relevant cost driver (this could be split into buckets, see example below)

Step 2: Calculate the indirect cost rate per unit of cost driver

We will use another case study (an extension of the previous one) to illustrate how product costs are calculated when there is more than one product type being manufactured. While direct materials and direct labour for each product can easily be identified, you will see that the complication lies in the allocation of manufacturing overheads to the various product types.

MGT10001 Accounting For Managers

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