Cost Allocation Is the Process of Dividing a Total Cost

question 62

True/False

Cost allocation is the process of dividing a total cost into its fixed and variable components.

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Definitions:

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, improving the accuracy of product and service costing.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, such as factory rent, utilities, and salaries of indirect labor.

Activity-Based Costing

A method of costing that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption.

Batch Setup

Batch setup refers to the process and the activities involved in preparing equipment or a production area for manufacturing a specific batch of products.