Final answer:
The three methods of cost-finding discussed are Cost-to-charge, Step-Down, and Activity-Based Costing. Each method works differently and is suitable for different types of organizations.
Step-by-step explanation:
The three methods of cost-finding are Cost-to-charge, Step-Down, and Activity-Based Costing.
1. Cost-to-charge:
This method calculates costs based on the charges that a company sets for its products or services. It divides the total costs by the total charges to determine the cost-to-charge ratio.
2. Step-Down:
This method allocates costs based on a hierarchy of cost centers. It starts with the highest-level cost center and allocates its costs to lower-level cost centers based on predefined allocation rules.
3. Activity-Based Costing (ABC):
This method allocates costs based on the activities that drive costs in an organization. It identifies the activities, assigns costs to them, and then assigns those costs to the products or services that use the activities.
Each method has its advantages and is suitable for different types of organizations. Cost-to-charge is commonly used in healthcare organizations to determine the cost of medical procedures. Step-Down is often used in manufacturing companies to allocate costs across different departments. ABC is useful for organizations with complex cost structures, such as service-based industries.