Differences between Single-Rate and Dual-Rate Cost Allocation Methods

Running head: MANAGEMENT 1
MANAGEMENT
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MANAGEMENT 2
The differences between the single-rate method and dual-rate cost allocation method
The single-rate cost-allocation method uses only one cost rate across all departments or
divisions in the organization but dual -rate cost-allocation uses different cost rates contributed to
the different departments or divisions. Single rate method does not categorize the fixed costs and
variable costs in the cost pool but dual-rate method categorizes the costs into two cost pools, i.e
variable and fixed cost pool whereby a different allocation base is used by each pool. Better
decision making information is provided by the dual-rate as compared to the single-rate method
(Kaplan & Atkinson, 2015). An example where the single-rate method is appropriate is in a
business producing various products whereby it is very crucial to know the cost incurred in the
production of each product. Knowledge of various overhead costs associated with various
departments enables management in the pricing of their goods and services competitively. Dual
rate method is more appropriate in companies producing different kinds of goods and services.
For example, a construction company will be in a good position to use the dual rate method when
allocating the costs since it will give the two different cost rates, that is one for subcontractors
and material and the other for the direct labor.
Balanced scorecard
Traditionally, businesses have judged their health by how much money they make. This is short
term yet businesses are intended to stay longer. Balanced scorecard emanates from looking at
other additional strategic measures for a more balanced view of performance. Example: Fruit tree
seedlings business perspectives (Bigliardi & Bottani, 2010).