Question

if a company calculated the final sales value of its various products that are manufactured and then subtracts out identified separable costs, what allocation method is it using?

Answer 1

Answer:

The allocation method use if a company calculated the final sales value of its various products that are manufactured and then subtracts out identified separable costs is Direct Allocation Method

Explanation:

The direct method allocates costs directly to the producing departments based on relative use.

This method subtracts reciprocal services that incur additional costs  For example, this method would ignore service provided by the data processing department to other support departments, such as personnel or maintenance.

Final sales value of its various products and services that are manufactured and the costs form a portion of the overhead cost of production, which is then allocated to inventory and the cost of goods sold.

This method provides a better picture of how costs are incurred, but requires more accounting effort. It also tends to delay the recognition of expenses until a later period, when some portion of the produced goods are sold.

Identified separable costs are then subtracted from final sales value.