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Cost Reallocation

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Based on the attached article I need help answering the following questions

Describe the process of allocation of costs in this organization. Do you agree with the approach? Why or why not?.

Identify those situations when common costs are allocated.

Explain the impact of allocating common costs for internal decision making.

Explain the impact of not allocating common costs for internal decision making.

How is the decision making in this organization affected by the manner in which costs are allocated? Provide numerical support as needed.

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Based on the attached article I need help answering the following questions

Describe the process of allocation of costs in this organization. Do you agree with the approach? Why or why not?

The Organization is CVP plant. A three-step process is followed in the allocation of CVP costs:
? Identify costs to be allocated.
? Allocate costs to project purposes.
? Calculate repayment responsibilities for each project purpose.

The CVP financial statement reflects costs of facilities that can be broadly grouped into the six categories. Costs of facilities transferred to Western are included as a seventh category.

Comments:
Yes I agree with the approach as it will help in finding out the cost of the different activities. This will help in finding out the performance of the different activities.

Identify those situations when common costs are allocated.

Here the cost allocation computations are ...

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