Cost Allocation Through the Method of Sections
Understanding the Method of Sections
A method is needed that avoids arbitrariness in cost calculation and provides information useful for decision-making (the goal of Analytical Accounting). For these reasons, the organization should be divided into parts, ordering information for each part, business unit, or area of responsibility.
Homogeneous Sections
These areas of activity are called Sections. A homogeneous section is a real division of the company, formed by a combination of resources directed towards the same goal, and whose activity can be measured in physical units called work units.
Characteristics of Homogeneous Sections:
- They are accounting entities, which doesn't mean they lack economic significance; they can often be derived from the