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Develop a cost allocation method for materials overhead

Please see the attached Word document. Would anyone be able to help me with this?

The questions that I have are as follows:

1. Using assumed numbers, develop a cost allocation method for materials overhead (MOH) to quantify and communicate the strategy of parts standardization.
2. Explain how use of your method would support the strategy.
3. Is any method which applies the entire MOH cost pool on the basis of one cost driver sufficiently accurate for product decisions in the highly competitive portable scope markets? Explain.
4. Are MOH product costing rates developed for management reporting appropriate for inventory valuation for external reporting? Why or why not?


Solution Preview


1) If we create a table of the cost comparison between handling charges of different versus the same part numbers (standardized), we can see a graphic example that can quantify and communicate this strategy.

Before standardization:
Part # Cost of handling/maintenance number used
1 .10 10000
2 .08 12000
3 ...

Solution Summary

Here is a sample of what you will find in this solution:

"3) This is a good start as it might be the largest bang for the effort. However, the situation is too competitive to stop here. Material costs can be driven down by many methods besides this one. "