![]() It is also necessary to consider the cost behavior of the relevant cost. In addition, consider whether or not the cost driver activity is easily measurable. Traditional costing methods allocate indirect costs to production activities based on volume of output.Ĭonversely, activity-based costing allocates indirect costs to particular production activities related to that cost. Example Of Cost Pools And Cost Free Know Yourĭownload the free Know Your Economics guide to easily manage the factors incurring costs in your company.ĭownload The Know Your Economics Worksheet Choosing Cost Drivers An indirect or variable cost may have several possible cost drivers. ![]() Example Of Cost Pools And Cost Free Know Yourīecause indirect costs, such as variable overhead, are not directly traceable to production activities, allocate them according to a cost driver rate to apply these costs to production activities.īased on the activity of the cost driver, the cost driver rate is the rate indirect costs applied to production activities.Example Of Cost Pools And Cost Full Cost Of.
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