Overhead cost control-Through allocation or elimination?

Overhead cost control-Through allocation or elimination?

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Article ID: iaor199224
Country: United States
Volume: 32
Start Page Number: 37
End Page Number: 42
Publication Date: May 1991
Journal: Production and Inventory Management Journal
Authors: ,
Abstract:

Automation, increase in support functions, and activity levels are often said to have contributed to the explosive growth of overhead (OH) costs. But in reality many OH costs are caused by activities and transactions resulting from managerial inadequacies, breakdowns in the normal functioning of organizations, and waste. Much of the past OH cost control efforts were focused on cost allocation methods, but allocation does not change the total cost. Companies should focus and expend their efforts on eliminating/reducing OH costs, which is possible only when the true causes are identified and removed.

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