Analysis of the Allocation of Indirect Production Costs
Abstract:
The allocation of indirect production costs represents an important aspect in the process of calculating the cost of manufactured products, directly influencing the quality of accounting information and the substantiation of managerial decisions. The purpose of this article is to analyze the methods of allocating indirect production costs and to highlight the importance of selecting an appropriate allocation base, adapted to the specific char acteristics of the entity’s activity. The research examines the main allocation bases used in practice, such as direct costs, direct wages, labor hours, or other relevant indicators, as well as their impact on determining the actual cost of production. The article demonstrates that the use of an inadequate allocation base may lead to a distortion of product costs and to erroneous interpretations regarding the economic and financial performance of the entity. By applying methods of analysis, synthesis, and generalization, the study illustrates how the correct allocation of indirect production costs contributes to a faithful representation of resource consumption and enhances the relevance of accounting information. The conclusions emphasize the need to correlate the allocation base with the particularities of the production process in order to ensure a rational and equitable allocation of indirect production costs.
