Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
Purposes of cost allocation
The following sequential outline of the cost-allocation process helps students seethe big picture.
1
Determine the purpose of the allocation, since this determines what costs will be allocated.
2
Decide how to allocate the costs from step 1. To do sob ab Decide how many indirect-cost pools to develop, and then
b
Identify an allocation base (preferably a cost driver) for each cost pool.
NB
: Allocation bases chosen using a cause-and-effect criterion are most likely to be cost drivers of the costs in the indirect-cost pool.

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