Rescinded [2016-02-02] - Guide to Costing

This Guide, which is based on generally accepted management accounting principles, presents a logical seven-step approach to be used for all costing exercises.
Date modified: 2008-07-08

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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).

  • If yes, select the appropriate cost driver for the cost base and allocate costs with the selected cost driver as either target or other cost object.
  • If the answer is no, assign the cost base to the appropriate cost pool. (Note: cost pools are used to accumulate costs by type of cost suitable for the same method of allocation – e.g., internal services and program support).

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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