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1. Introduction 2
2. Purpose of cost allocation 2
To predict the economic effects of 2
Strategic and operational control decisions 2
To obtain the desired motivation and to provide 2
Feedback for performance evaluation 2
To compute income and asset valuations 2
To justify costs or obtain reimbursements 2
3. Types of costs 3
4. Allocation of Service Department costs 3
5. Allocating costs to final product 4
The Traditional Approach 4
ABC Costing 4
6. ABC vs. Traditional costing 4
6. Conclusion 4
Bibliography 5

1. Introduction
The purpose of this paper is two answer two important questions: Why do companies allocate costs? How do companies allocate costs? It is important for the companies to find the proper method to allocate the costs. Cost allocation is an important issue in many companies because many of the costs associated with designing, producing and distributing products and services are not easily identified with the products and services that are created.......

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Approximate Word Count: 1210
Approximate Pages: 5 (250 words per double-spaced page)

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