[accountliles]

If non-traceable costs are not allocated to the various operating units within an organization, who ends up paying these costs?

[morgaine300]

Who pays for the costs and where the costs are allocated do not have to be related at all.

Let's use a college as an example. And one of the departments there is registration. They have their own set of employees, equipment, supplies, etc. And they have a budget for anything they have control over. But this doesn't mean the department is literally paying for these. Every company will handle things their own way, but it may just be a matter of filling out some type of paperwork that accounts for everything allocated, and this in turn goes to the financial department.

So paying and allocating are not the same thing, though it doesn't mean they couldn't be under certain circumstances. (There are so many ways this can be applied.)

As for anything not allocated to an operating unit, or department, or store, or factory or wherever, they just go back on the company itself as a whole. Like a manufacturer that has several plants would have a headquarters that would have its own costs, and everything from the plant just comglomerated into that. For something smaller, like just a small company with several departments, the department numbers may never even be reported on the final published statements. There may just be some small internal reports done and then all numbers lumped together for the overall company statements. Anything not allocated is just lumped into those statements.

Hope that makes sense. I'm trying to keep it simple cause this can conceivably get very complicated.

[MaggieMouse]

Most of the time they go to period costs, unless there are some kind of allocation method, for example, using a predetermined rate, to allocate to different segments.

[gkerr063]

If non-traceable costs are not allocated to the various operating units within an organization, who ends up paying these costs?

[MaggieMouse]

Ultimately, the customers are end up paying for the costs, whether they are product cost or period cost.

[tlife98]

If non-traceable costs are not allocated to the various operating units within an organization, who ends up paying these costs?