Article | REF: AG1020 V2

Management accounting and costs analysis

Author: Didier LECLERE

Publication date: April 10, 2024

You do not have access to this resource.
Click here to request your free trial access!

Already subscribed? Log in!


Français

4. Rational" allocation of fixed costs

Here, "rational" is not opposed to "irrational": the term simply means that fixed costs are allocated according to a ratio (the ratio between actual activity and normal activity).

4.1 The need for rational imputation

In all the foregoing, we have assumed that the level of activity for the period was "normal", i.e. that the company was neither under- nor over-active. However, the company may be going through difficult economic times (economic crisis, "technical unemployment"), or may have been over-optimistic, investing too much or over-sizing a production facility that ends up being under-utilized. In such cases, we need to reintroduce the variable/fixed costs distinction and treat fixed costs specifically, otherwise we end up with aberrant full costs, which...

You do not have access to this resource.

Exclusive to subscribers. 97% yet to be discovered!

You do not have access to this resource.
Click here to request your free trial access!

Already subscribed? Log in!


The Ultimate Scientific and Technical Reference

A Comprehensive Knowledge Base, with over 1,200 authors and 100 scientific advisors
+ More than 10,000 articles and 1,000 how-to sheets, over 800 new or updated articles every year
From design to prototyping, right through to industrialization, the reference for securing the development of your industrial projects

This article is included in

Industrial management

This offer includes:

Knowledge Base

Updated and enriched with articles validated by our scientific committees

Services

A set of exclusive tools to complement the resources

Practical Path

Operational and didactic, to guarantee the acquisition of transversal skills

Doc & Quiz

Interactive articles with quizzes, for constructive reading

Subscribe now!

Ongoing reading
Rational" allocation of fixed costs