Part A:
Allocation of indirect costs is an area of constant discussion in many companies, with division, department, and product managers often questioning the amount of indirect costs allocated to their respective sections. Describe methods which may be used to allocate support costs within organizations containing multiple support departments. Discuss advantages and disadvantages of the various methods. What is the role of the cost accountant in these cases? Discuss examples of bundled products or services. Why would businesses want to sell bundled products? What benefits, if any, are there for the consumer?
Part B:
Why do companies need to allocate joint costs? Should joint cost be included in deciding making and/or performance evaluation? Discuss the approaches and methods used to allocate joint cost, along with the strengths and weaknesses of each approach. Show how the physical measure and constant gross margin NRV methods can sometimes give less-than-optimal results.