Answer
1. Economic Decision Making: Cost allocation helps in making informed decisions by assigning costs to specific activities or products, enabling better cost analysis.
2. Motivation: It can motivate managers and employees to manage their resources efficiently, as they are accountable for the allocated costs.
3. Cost Justification: It justifies costs for various purposes, such as setting prices or determining reimbursement amounts for services provided.
4. Performance Measurement:Cost allocation assists in measuring income and assets accurately, which is essential for financial reporting and analysis.
These purposes highlight the importance of cost allocation in various aspects of business management.
Work Step by Step
1. Economic Decision Making: Cost allocation helps in making informed decisions by assigning costs to specific activities or products, enabling better cost analysis.
2. Motivation: It can motivate managers and employees to manage their resources efficiently, as they are accountable for the allocated costs.
3. Cost Justification: It justifies costs for various purposes, such as setting prices or determining reimbursement amounts for services provided.
4. Performance Measurement:Cost allocation assists in measuring income and assets accurately, which is essential for financial reporting and analysis.
These purposes highlight the importance of cost allocation in various aspects of business management.
