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Is the following statement true? "Cost allocation refers to

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Is the following statement true? "Cost allocation refers to the process of assigning direct costs." Discuss with examples.

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Your tutorial is 329 words in everyday language with two examples to help you follow the rule.

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This is not true. Costs that are direct do not need to be allocated. Here's why. Direct costs are costs that are caused by one identifiable activity, process or job.

For instance, the bricks that are used to construct house #456. We know that those bricks went to that house. We put the costs all on that job. We don't need to allocate the bricks to anything. What about the labor for putting the bricks up on the house exterior? Also identifiable. You look at the time cards and see how many ...

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  • MSc, University of Virginia
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