Internal cost allocation

Internal cost allocation is a form of secondary cost allocation that is based upon quantities valued by cost rate. The activities are characterized by their respective activity type (allocation base) and are uniform in the sense that the activity delivered by an activity quantity can be measured.

The allocated costs are a result of the product between activity quantity and cost rate. The allocated costs credited to the providing cost center and charged to the receiving cost center. To carry out an internal cost allocation, you must know the following parameters:

Providing cost center
Receiving cost center, receiving order, cost unit or other cost-bearing account assignment object
Cost rate of providing cost center for the type of activity delivered
Quantity of related activity per cost center

There is a challenge when operating controlling systems to reduce manual work as much as possible to zero and automatically control processes.

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Internal cost allocation

OVERVIEW