ACC 410 Lecture Notes - Lecture 5: Income Tax

• School: Ryerson University
• Department: Accounting
• Course: ACC 410
• Professor: Vanessa Magness

Document Summary

A common cost is a cost for a resource that is shared among two or more departments, activities, products or other costs objects. Objectives of allocating support department costs: external reporting. Provide incentives for efficient production of support services. Provide incentives for appropriate use of support services. Monitor use and production of support services: strategic and operating decisions. The decision to outsource a support department would be based on support department allocations. Relevant support costs are hard to measure, so allocation are used instead. When evaluating costs for a keep/drop decision, support costs allocated to an operating department might not be eliminated if the operating department is dropped. Identifying appropriate cost pools for support and operating departments. Whether to establish separate cost pools for fixed costs and variable costs. How to assign costs to cost pools. Identifying the most appropriate allocation bases for each cost pool.