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Cost Accounting: How to change the single overhead pool cost allocation

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Art and Bert provide tax consulting for estates and trusts. Their job costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (research support). The indirect-cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labor-hours.

What might be some ways for the firm to change from a one-pool allocation concept ?

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Solution Preview

An important way of changing from one pool allocation is to divide indirect costs into activities like cost of documentation, communication costs and traveling cost. The cost of documentation can be allocated on the basis of the number of pages of the final report, the communication and ...

Solution Summary

The solution suggests several ways to reallocate indirect costs based on other allocation strategies.

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