Secondary Cost Allocation in Cost Accounting
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Secondary Cost Allocation
The secondary cost allocation can take two forms:
Direct Redistribution
The expenses of auxiliary sections are transferred directly to the main sections. It's simple and fast but does not take into account the possible benefits that may occur between the auxiliary sections.
Indirect Redistribution
This procedure takes into account possible benefits from auxiliary sections. Part of the cost of the auxiliary sections is moved to other auxiliary sections before the final distribution of the remaining sections.
Two Types of Indirect Redistribution
- Unilateral Cascade: First, sections are sorted in increasing order of importance in terms of expenses absorbed or higher, depending on the amount supplied. It then moves the cost of