Discussion: Overhead Allocation
Overhead allocation is the process of spreading overhead (indirect costs) back to certain jobs, products or cost centers. Find and describe an example of a company that uses at least three product lines. How would you define the overhead accounts, and what method would you choose to use to allocate these accounts back to the job, product, or cost center? Discuss the method you have chosen and include some advantages and disadvantages of this method. How can the assignment of overhead costs affect operations and profit reporting?