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The cost allocation sheet in cost and management accounting

The aim of cost accounting is to clear all costs incurred to produce a product, sum (= cost) and to determine on this basis the net selling price of the product. To specify the selling price of a product, a company must necessarily know how much does it cost to produce a product. This task is done through the cost accounting. Under the full cost accounting, all costs are taken into account and then distinguish between fixed and variable costs, and thus a slightly different view of the costs thrown.


The figures for the cost and management accounting come from the accounting records. Expenses are called costs. Incomes are called services. For the Cost Management, only the income and expenses are needed which have exactly something to do with the operating purposes (such as the production of goods). Non-operating incomes mostly disregarded.


1. The cost allocation sheet


In the cost allocation sheet all overheads are summarized. Overhead costs are costs that are not directly related to a single product. (E.g. wage for cleaning lady, electricity for lights in the office, imputed wage of the entrepreneur, etc.) The sum of a cost is determined using a distribution key to the four main cost centers are divided as:

I. Material

II. Manufacturing

III. administration

IV. sales


The four main cost centers are the places where the costs are incurred in the operation during the production process. "In order to verify the effectiveness of this "cost allocation” in operation, all costs are allocated to the main cost-set. In large enterprises, however, there are hundreds of summarized cost centers whose numbers end in all the four major cost centers. As a result, the company has always accurate knowledge of how to develop the cost and where the cost might suddenly run out of control. Based on this information, a company can react faster and possibly try to reduce the cost in certain places.


Special features: The multistage cost allocation:

In multistage cost allocation, there is also another service cost centers in addition to the 4 major cost centers. (I.e. has divided all cost elements on all the specified cost centers). Once you have edited the cost allocation normal adding first the service cost centers. Then gradually the sums of the service cost centers on the 4 main cost centers are divided up again at the end, only totals for each of the 4 main cost centers remain.
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