D365 F&O Cost Accounting

Cost accounting lets you collect data from various sources, such as the general ledger, sub-ledgers, budgets, and statistical information. You can then analyze, summarize, and evaluate cost data, so that management can make the best possible decisions for price updates, budgets, cost control, and so on. 

The purpose of cost allocation: Cost allocation is the process of identifying, aggregating, and allocating costs to cost objects. Cost objects can be products or any activities that you want to measure the cost of separately.

For example: finished products, research projects, customers, sales territories, or departments.

D365 Finance supports all 3 methods:

• Direct

• Step down

• Reciprocal

Besides that, the Cost Accounting module also supports cost allocation criteria:

• Traditional method: allocating common costs based on allocation criteria such as the number of completed products, direct labor costs, or direct revenue.

• Activity-based costing (ABC) method: allocating common costs based on the level of consumption or utilization of cost drivers. For example:

Link reference: learn.microsoft.com/en-us/dynamics365/finance/cost-accounting/cost-accounting-home-page