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- Title
A Unique Procedure for Allocating Common Costs from a Production Process.
- Authors
BILLERA, LOUIS J.; HEATH, DAVID C.; VERRECCHIA, ROBERT E.
- Abstract
This article studies the problem of allocating common costs in the production of multiple products. Cost allocation remains firmly entrenched in accounting despite attempts to eliminate it. The authors propose a set of requirements that can provide a starting point for debating alternative options or determining other appropriate methods on the basis of specific goals. The authors describe how to motivate the allocation properties. They assert that a cost allocation procedure is additive if it yields an identical per-unit charge regardless of whether the procedure is applied directly to the process or indirectly to each of the different cost components of the process.
- Subjects
UNITED States; COST allocation; COST accounting; AUDITING; ACCOUNTING; COST centers (Accounting)
- Publication
Journal of Accounting Research (Wiley-Blackwell), 1981, Vol 19, Issue 1, p185
- ISSN
0021-8456
- Publication type
Article
- DOI
10.2307/2490968