LIMITATIONS OF OVERHEAD

ALLOCATION
AUTHOR(S)
Vatter, William J.
PUB. DATE
April 1945
SOURCE
Accounting Review;Apr45, Vol. 20 Issue 2, p163
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The writer has no quarrel with cost accountants and their methods, nor is it implied that
cost figures, because of their imperfections, are hopelessly useless. By and large, the cost
accountant performs well a function that is essential to carrying on accounting in general
and basic to the furtherance of intelligent management. There are, however, three general
conclusions that may be drawn from the exposition presented in the article; these should
be emphasized. First, there is a real need for research directed toward the establishment
of principles for cost allocation, especially with regard to the allocation of overhead
costs. Second, there is good reason for broadening the concepts that have been applied to
the field of cost accounting, to embrace techniques of statistical and mathematical
analysis. Third, and most important, the limitations of available methods, the
compromises of expediency, and the conflicting objectives that enter into cost
calculations should make the accountant more careful as to his terminology with respect
to unit costs.