AN EVALUATION ABOUT THE IMPORTANCE OF CRITERIA DETERMINING THE ALLOCATION SEQUENCE IN STEP-DOWN ALLOCATION OF MANUFACTURING OVERHEAD COSTS

Year 2010, Volume: 10 Issue: 3, 751 - 771, 01.08.2010

Haluk Bengü Ahmet Vecdi Can

Abstract

In today’s business environment, one of the most popular methodologies used
to allocate manufacturing overhead cost (MOC)s on products is “Step-down
Allocation Method”. In this methodology, transferring of manufacturing overhead
costs from supplementary cost centers to primary cost centers are made
considering specific rules (Can, 2003:92). Also, after manufacturing overhead
costs accrued in one of the supplementary cost centers are allocated to other
cost centers, they can not again be allocated again (Üstün,1994:251).
Consequently, sum of manufacturing overhead costs is gathered all together in
primary cost centers to be allocated (Altuğ, 2001:225). However, in these
situations, from which of cost center to start allocation becomes an important
subject. Here, the sequence of allocation plays two important roles and has two
different effects. The first effect of sequence of allocation is on cost centers by
means of cost planning and control. The second effect is on product parties by
means of production planning and product costing&pricing.

In this study, the sequence of allocation of manufacturing overhead costs is tried
to be presented by a hypothetical application.

Keywords

Manufacturing overhead costs, Step-down a Keywords: llocation methodology, Cost center

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