Peculiarities and advantages of distribution of production overhead costs by activity types
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Date
2019
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
The method of calculating costs according to the types of activities ensures calculating the cost of unit of production more accurately. Based on that, we can improve determination of the product selling price and realization strategy, as well as effectiveness of management and quality of the decision made. - When applying this approach, it is better evident what overhead costs are spent for; - The approach of calculating cost according to the types of activities recognizes that production overhead costs are not related only to the volume of production and selling; - For many companies, production overhead costs represent a significant part of total costs. Therefore, for managing the business properly the management needs the information about what overhead costs are paid for. Control over production overhead costs can be exercised by managing and controlling of cost-driver; - Using this approach in a complex business environment allows us to determine actual costs on the product; - Calculation of costs according to the types of activities can be used not only when distributing production overhead costs but in case of distributing all types of overhead costs.
Description
Keywords
Cost of production, calculation of production cost, production overhead costs, assignment rate, cost driver, cost pool, level of activity, types of activity
Citation
The 4th International Scientific Conference: "Challenges of Globalization in Economics and Business", Tbilisi, 2019, pp. 523-528