For years, in industrial firms the ratio of overhead costs to total costs has been increasing. This development involved a search for alternatives for the traditional overhead percentage cost accounting systems in manufacturing departments (for example with the machine overhead rate accounting) and in indirect departments afterwards. In the following, problems of the traditional overhead cost allocation are discussed and possible solutions are pointed out. In the second chapter, a method is described which makes it possible to allocate manufacturing overhead costs to different products easily. The paper finishes with a general description of an activity based overhead cost allocation.
Keywords
- Activity Cost
- Index Number
- Cost Driver
- Harvard Business Review
- Overhead Cost
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