Long description for image: Assignment of Costs to Cost Objects

Model for the Assignment of Costs to Cost Objects

Start by identifying the cost base.

Is the cost base directly identifiable with the target cost object?

If the answer is YES, the target cost object assignment process can be completed.

If the answer is NO, identify if the cost base have a casual relationship with the three cost objects? (Note: the principle of cause and effect means costs can be traced to cost objects such as salary being tracked on the basis of time spent by employees on each object).

Once assigned, select the appropriate bases for allocating costs from each cost pool to the target and other cost objects. (Note: allocation methods are selected on the most reasonable and cost-effective basis e.g., the estimated level of effort for each cost object or number of FTEs).

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