In the formula Y = a + b X, X represents the estimated total amount of the allocation base.
What is total amount of allocation base?
Cost accounting assigns overhead expenses using an allocation base. A quantity, such as the number of machine hours utilized, kWh consumed, or occupied square footage, might serve as an allocation base.
What are overhead expenses?
Rent, insurance, and utility charges are examples of overhead expenditures that go into running a business. Operating costs are necessary for the firm to function and cannot be avoided. Regular reviews of overhead costs are necessary to improve profitability.
What is cost accounting?
Assigning costs to cost items, which often comprise a corporation's goods, services, and other activities involving the company, is the process of cost accounting. Cost accounting is beneficial since it can show a company where its money is going, how much it makes, and where it is losing money.
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