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Benefits Of Indirect Costs Allocation With Cost Drivers

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Author Info

  • Delia MANEA

    ()
    (Spiru Haret University, Faculty of Management,Brasov, Romania)

  • Mircea BARBU

    ()
    (Spiru Haret University, Faculty of Management,Brasov, Romania)

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    Abstract

    Due to the technological developments that has occurred in recent years within the business entities, the cost structure was affected, so that the largest share of the production cost is held by the indirect cost. Traditional management accounting and cost calculation methods allocate indirect cost based on an item which serves as a criterion, key or core distribution. The allocation of indirect cost has the disadvantage of an arbitrary distribution, depending on some basis subjectively chosen. The ABC method allocates indirect cost directly to products starting with the activities done for their production rather than through some inaccurate and arbitrary quotas, thus achieving a relevant production cost. The paper will present models of allocating indirect costs to products, both through traditional management accounting and cost calculation methods and with cost drivers.

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    File URL: http://www.managementgeneral.ro/pdf/1_2012_19.pdf
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    Bibliographic Info

    Article provided by Spiru Haret University, Faculty of Management Brasov in its journal Review of General Management.

    Volume (Year): 15 (2012)
    Issue (Month): 1 (Mai)
    Pages: 212-220

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    Handle: RePEc:fmb:journl:v:15:y:2012:i:1:p:212-220

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    Web page: http://www.spiruharet.ro/facultati/facultate.php?id=7
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    Related research

    Keywords: indirect cost; Activity-Based Costing (ABC) method; cost driver;

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