Overhead Cost

Difference between traditional volume based and activity based overhead cost allocations systems

Introduction

Assigning the costs such as direct labor, material and manufacturing overhead costs for a particular item or a product, is a straight forward process in which that cost become part of the inventory on the financial statement of a firm i.e. balance sheet and also becomes the cost of goods sold on the income statement. For determining the cost of a product, cost methods are very useful that are related for generating revenues for the companies. There are two types of costing systems that are used in the businesses; ...