Limitations of Overhead Allocation
1
LIMITATIONS OF OVERHEAD ALLOCATION AUTHOR(S) Vatter, William J. PUB. DATE April 1945 SOURCE Accounting Review;Apr45, Vol. 20 Issue 2, p163 SOURCE TYPE Academic Journal DOC. TYPE Article ABSTRACT The writer has no quarrel with cost accountants and their methods, nor is it implied that cost figures, because of their imperfections, are hopelessly useless. By and large, the cost accountant performs well a function that is essential to carrying on accounting in general and basic to the furtherance of intelligent management. There are, however, three general conclusions that may be drawn from the exposition presented in the article; these should be emphasized. First, there is a real need for research directed toward the establishment of principles for cost allocation, especially with regard to the allocation of overhead costs. Second, there is good reason for broadening the concepts that have been applied to the field of cost accounting, to embrace techniques of statistical and mathematical analysis. Third, and most important, the limitations of available methods, the compromises of expediency, and the conflicting objectives that enter into cost calculations should make the accountant more careful as to his terminology with respect to unit costs.
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Transcript of Limitations of Overhead Allocation
LIMITATIONS OF OVERHEAD ALLOCATION
LIMITATIONS OF OVERHEAD ALLOCATION
AUTHOR(S)
Vatter, William J.
PUB. DATE
April 1945
SOURCE
Accounting Review;Apr45, Vol. 20 Issue 2, p163
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The writer has no quarrel with cost accountants and their methods, nor is it implied that cost figures, because of their imperfections, are hopelessly useless. By and large, the cost accountant performs well a function that is essential to carrying on accounting in general and basic to the furtherance of intelligent management. There are, however, three general conclusions that may be drawn from the exposition presented in the article; these should be emphasized. First, there is a real need for research directed toward the establishment of principles for cost allocation, especially with regard to the allocation of overhead costs. Second, there is good reason for broadening the concepts that have been applied to the field of cost accounting, to embrace techniques of statistical and mathematical analysis. Third, and most important, the limitations of available methods, the compromises of expediency, and the conflicting objectives that enter into cost calculations should make the accountant more careful as to his terminology with respect to unit costs.
