Primary cost pool definition
/What is a Primary Cost Pool?
A primary cost pool contains those costs that are closely aligned with the performance of a specific task. Aggregating costs in this manner allows the accountant to compile the cost of the targeted task. Primary cost pools are frequently associated with the production of goods and services.
Costs are also assigned to the primary cost pools from secondary cost pools. Once the primary pools have been loaded with costs, they are assigned to cost objects, such as goods and services. The basis for this assignment is the level of usage by each cost object of an appropriate activity driver. An activity driver is the most significant cause of an activity.
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Examples of Primary Cost Pools
Examples of primary cost pools are as follows:
Material overhead pool. Contains costs related to the acquisition and handling of direct materials, such as purchasing, freight, receiving, inspection, materials handling, warehousing, and inventory adjustments.
Production operations pool. Contains costs related to the manufacture of goods, such as production supervision and related benefits, indirect materials and supplies, and the downtime of direct labor personnel when they are not working on a specific job. This cost pool may be broken down into a pair of more specific primary cost pools, which are as follows:
Assembly cost pool. Contains costs related to the assembly phase of products within the production process.
Finishing cost pool. Contains costs related to the final finishing work on goods that have already been assembled.