Operating Costing is a method of ascertaining the costs of providing or operating a service. This costing method is applied by undertakings that provide services rather than the production of goods. Such undertakings, for example, are; transport concerns, gas agencies; electricity suppliers; hospitals; theatres, etc. Because of the varied nature of activities carried out by…
3 methods of allocating service department costs to producing departments are; Direct method The direct method is the most widely used. This method ignores any service rendered by one service department to another, and it allocates each service department’s total cost directly to the producing departments. Step Method Step method sometimes called a sequential method…
Overhead is the aggregate of indirect material, indirect labor, and indirect expenses. It refers to any cost which is not directly attributable to a cost unit. The term indirect means that it cannot be allocated but can be apportioned to or absorbed by cost centers or units. All those costs/expenses that cannot be attributed directly…