So your total assigned cost to produce one artisan-crafted backpack is $42.30. Your equation incorporating your indirect costs looks like this: $42 + ($30/100) + ($500/100) = $42.30. Now you’re in a position to determine how much profit you want. If you want to make a $20 profit, you can add that to your cost of $42.30.
Cost Allocation
Cost allocation is the process of identifying, accumulating, and assigning costs to costs objects such as departments, products, programs, or a branch of a company. It involves identifying the cost objects in a company, identifying the costs incurred by the cost objects, and then assigning the costs to the cost objects based on specific criteria.
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So your total assigned cost to produce one artisan-crafted backpack is $42.30. Your equation incorporating your indirect costs looks like this: $42 + ($30/100) + ($500/100) = $42.30. Now you’re in a position to determine how much profit you want. If you want to make a $20 profit, you can add that to your cost of $42.30.
Cost allocation is the process of identifying, accumulating, and assigning costs to costs objects such as departments, products, programs, or a branch of a company. It involves identifying the cost objects in a company, identifying the costs incurred by the cost objects, and then assigning the costs to the cost objects based on specific criteria.