What method is used for indirect cost allocation?

Indirect cost allocation adopts equivalent output method.

1. Equivalent production method is to determine their completion degree through technical calculation, fixed man-hour consumption or experience estimation according to the product quantity counted at the end of the month, and then convert WIP into product quantity according to the completion degree.

2. Then calculate the total production cost of products according to the quantity of finished products and the equivalent of products in process, and find out the calculation methods of unit cost, finished products cost and products in process cost.

3. Equivalent production method is a calculation method to allocate production costs between finished products and products.

4. It is suitable for the situation that there are many products at the end of each month, the number of products changes greatly at the end of each month, and the proportion of direct materials and various processing expenses in the product cost is not much different. It is widely used in cost accounting of industrial enterprises.

Precautions:

1. When calculating the distribution cost by equivalent, the key problem is how to determine the feeding and processing degree of product subprojects. Generally, it is reasonable to calculate according to 50%. When products are processed in different processes, the degree of product processing is before 50%, and some are close to 100%.

2. For a product, it is not calculated by the degree of completion in the front, nor by the degree of completion in the back, but by a compromise method, that is, the part with more processing after 50% makes up for the part with less processing before 50%.

3. This is why 50% is generally used to calculate the degree of product completion. This calculation is reasonable in theory, but in practice, the situation is quite different, which requires specific and accurate calculation.