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Int. Acc. MA LECT 3: Cost allocation part 2: Chapter 5 + chapter 11 ABC…

- - - - Allocates each support department costs directly to the operating departments.
      - Ignores the fact that service departments may also provide services to other service departments
    - - Allocates support department costs to other support departments and to operating departments
      - Once a service department’s costs have been allocated, no subsequent costs are allocated back to it
      - Which support department should be allocated first? The support department providing the greatest percentage of support to other support departments is allocated first.
- - - - A product consumes a relatively high level of resources but is reported to have a relatively low total cost.
      - Making losses
    - - A product consumes a relatively low level of resources
        but is reported to have a relatively high total cost.
      - Losing market share to competitors