The traditional method of allocating overhead costs
Explain how managers classify costs and how they use these
cost classifications.
LO2 Compare how service, retail, and manufacturing organizations
report costs on their financial statements and how they
account for inventories.
LO3 Describe the flow of costs through a manufacturer’s inventory
accounts.
LO4 Define product unit cost, and compute the unit cost of a
product or service.
LO5 Define cost allocation, and explain how the traditional
method of allocating overhead costs figures into calculating
product or service unit cost.
How managers use cost
information to solve, “How
much does it cost?” can
result in differing answers.
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