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Home > QFINANCE Dictionary > Definition of cost allocation

Definition of

cost allocation

Accounting

assignment of fixed expenses to cost centers the way in which overhead expenses are assigned to different cost centers

Recommended Further Reading (Term count)
  • Profitability Analysis Using Activity-Based Costing
    by Priscilla Wisner
    Cost allocation in firms can provide misleading information about the profitability of products, product lines, customers, and markets. Traditional cost allocation practices allocate all manufacturing overhead costs using a single driver such as direct labor hours, direct labor dollars, or machine hours. Sales-related costs are typically ignored. While technically accurate, in most complex organizations a single overhead cost driver is not...
  • Activity-Based Costing
    Activity-based costing (ABC) attempts to create the big picture—crystal-clear, full, and accurate—by painting assorted little pictures.ABC identifies the relationship between a business activity and all the resources needed to conduct it by assigning costs to each of those resources, thus presenting the true total expense of the entire activity. ABC can account for so-called “soft,” or indirect, operating costs, and thus produce a more...
  • Management Accounts
    Company accounts fall into two categories: financial and management. While financial accounts are regulated and audited reports of financial transactions and processes, the management accounts are designed to help key business executives understand the overall performance of the business. Most companies produce these reports monthly or quarterly.
  • Creating Value with EVA
    by S. David Young
    The value-based management movement is based on two assumptions. The first is that the main aim of any business in a market economy is to maximize shareholder value. The second is that markets are too competitive for companies to create such value by accident. They must plan for it. And that means having the right culture, systems, and processes in place so managers make decisions in ways that deliver better returns to shareholders.At the very...

Definitions of ’cost allocation’ and meaning of ’cost allocation’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’cost allocation’ and other financial terms with our online QFINANCE Financial Dictionary.

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