Cost Accounting notes
Operating costs 1600000 920000 680000
Current disposal value of old machine - (40000) 40000
New machine - 600000 (600000)
Total relevant costs 1600000 1480000 120000
Chapter 14 - cost allocation, customer-profitability analyses, sales-variance analysis
Purpose of allocating indirect costs: 1. To provide information for economic decisions 2. To motivate managers and other employees 3. To justify costs or compute
reimbursement amounts 4. To measure income and assets.
Criteria to guide cost- allocation decisions:
1. Cause and effect - managers identify the variables that cause resources to be consumed.
2
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