Overhead allocation assigns indirect costs to production for accurate product costing

Steps:

• Define overhead allocation as distributing indirect costs like utilities and supervision to cost objects.
• Identify that the primary goal is tracing these costs to production departments where products are made.
• Compare choices: A matches direct assignment to production; others focus on sharing between departments.
• Select A as it aligns with standard cost accounting practice.

Why A is correct:

• Overhead allocation assigns indirect costs to specific production departments to determine full product costs, per cost accounting principles like absorption costing.

Why the others are wrong:

• B: Sharing costs between production departments is a secondary step, not the core purpose of allocation.
• C: Sharing between service departments involves interdepartmental allocation, not the main overhead purpose.
• D: Identical to C, incorrectly limits to service departments only.

Final answer: A