Research Paper on "Cost Allocation"
Research Paper 3 pages (1099 words) Sources: 3
[EXCERPT] . . . .
financial managers, it is important that you identify and allocate costs appropriately. Discuss the major cost categories. What are some of the methods used to determine the cost category?Two primary categories of costs exist: direct costs and indirect costs. Direct costs, as their name suggests, are those that can be identified specifically as having a relatively stable contribution to the final cost of a project. Indirect costs tend to be more variable. A good example of direct and indirect costs may be found when constructing a budget for going to college. Examples of direct costs might include tuition, mandatory activity fees, and housing fees (such as the cost of a dormitory room). Without satisfying these costs, which are all directly paid to the institution, attending school is impossible. However, there are also indirect, contingent costs not paid to the school which are just critical and must be satisfied to successfully complete a degree such as books, transportation and off-campus rent (if not living on-campus), a computer, and personal expenses (Direct and indirect costs, 2010, Sallie Mae).
How can service organizations benefit from activity-based management to become competitive?
Activity-based management focuses on maximizing organizational value from streamlining processes, which makes it ideal for service-based organizations. For service organizations, 'people' and 'processes' rather than 'products' are the focus. Moving individuals more effectively from task to maximize their knowledge base or simply reduce transportation costs; eliminating wasteful extra salaries by consolidating tasks for workers; using technology to speed worker pro
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Cost flows in an accounting system
Cost flow assumptions involve how costs are allocated within an enterprise: the two most typical methods are LIFO and FIFO. Last in, first out (LIFO) means "the units remaining in ending inventory are costed at the oldest unit costs available; the units in cost of sales are costed at the most recent unit costs available" (Gibson, 2001, p1.). For industries with relatively stable demand and costs, and large inventories and predictable growth, LIFO is often used. It also tends to be more advantageous for tax purposes. FIFO "assumes that the cost of items sold in a period reflects the oldest cost in inventory just before sale. As a consequence, remaining inventory valued at FIFO more closely represents current or replacement cost," and is a more accurate reflection of the physical flow of goods, but can be disadvantage for a producer in an inflationary market (Gibson, 2002, p.1)
Just-in-time manufacturing (JIT)
JIT focuses on keeping inventories low to minimize waste and the accumulation of excess products. Stockpiled inventories quickly grow obsolete and often must be sold at a loss. Thus JIT is dependant upon maintaining close relationships with suppliers, to flexibly respond to shifts in demand. Suppliers for JIT firms tend to be relatively few, and there tends to be a high degree of compatibility between different component parts, to further streamline processes and enable all inventories to be used during production surges. The relatively few suppliers and… READ MORE
Quoted Instructions for "Cost Allocation" Assignment:
*****¢ As financial managers, it is important that you identify and allocate costs appropriately. Discuss the major cost categories. What are some of the methods used to determine the cost category? (50 words).
*****¢ How can service organizations benefit from activity-based management to become competitive? Cite specific examples. (50).
1. Cost flows in an accounting system (half a page)
2. Just-in-time manufacturing (160 words)
3. Product versus period classification (half a page)
4. Value chain (half a page)
5. Proactively controlling costs using target costing
6. Conversion costs (160 words)
Use at least two references to prepare the question responses and the cited summary. The references should be one academic and one practitioner resource.
*****¢ Academic resources are theoretical and include accounting journals and a company*****s internal policies and procedures manual.
*****¢ Practitioner resources are practical applications and include accounting textbooks, white papers, and research papers.
One inch margins, 330 words per page as specified on the ***** website and standard 12 inch times roman standard. 2-4 sources are required.
How to Reference "Cost Allocation" Research Paper in a Bibliography
“Cost Allocation.” A1-TermPaper.com, 2010, https://www.a1-termpaper.com/topics/essay/financial-managers-important/3803259. Accessed 4 Oct 2024.
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