Essays on Unit Cost Allocation Accounting Systems Assignment

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The paper "Unit Cost Allocation Accounting Systems" is a perfect example of a finance and accounting assignment. The market environment that firms have to operate in is frequently undergoing change with continually rising rivalry. Therefore organizations have to manage costs much more proficiently to ensure optimization of product margin above production costs. Accounting is largely involved with giving information to management and those who make decisions. Therefore it is imperative that measurement of the cost items be accurate in allocating cost for each unit of product. Brilliant Accents Company uses the traditional way to cost management referred to as full costing as is evidenced in their unit costs accounting.

Using this means, the total cost is divided into direct plus indirect costs. Direct costs can be attributed directly to the unit product while indirect costs/overheads include other elements of cost which cannot be attributed directly to units of product but are a result of the general operation of the firm (Hermanson, Edwards and Ivancevich, 2007). For firms producing more than one brand or product type, allocation of overheads to particular unit produce becomes more of a problem because all units cannot be allocated equal unit cost.

For a business like Brilliant Accents Company, one of the systems that can be used for allocation of overheads to a particular unit product is by viewing overheads as service renderers for individual cost units (Atrill and McLaney, 1995). Since unit cost is not to be allocated equal portions of overheads, managers must identify observable measures for use as allocation basis. Brilliant Accents uses a system of allocation of overheads per hours used up in production between the two products. Although there is no totally accurate method for allocating overheads to unit cost, the level of accuracy in measurement of unit cost should uphold the Accrual Concept.

The Accrual Concept requires that all costs associated with the production of a particular unit of a commodity be apportioned to it in the accounts (Mongiello, 2012).

References

Atrill, P and McLaney, E 1995, Management Accounting for Decision Makers (6th Ed.), Prentice Hall: London.

Cokins, G 2006, Implementing Activity-Based Costing, Institute of Management Accounting. Montvale: New Jersey.

Hermanson, Edwards, and Ivancevich, 2007, Accounting Principles: Managerial Accounting. Textbook Equity, Inc. EBook, Retrieved from http://www.textbookequity.com/

Ireland, J 2005, Principles of Accounting, University of London Press: London.

Mongiello, M 2012, Management Accounting, University of London Press: London.

Haider, S and Ali, M and Shaukat M 2011. Strategic Management Accounting – A messiah for Management Accounting? Australian Journal of Business and Management Research: Australia, Vol. 1, No. 4 [01 - 07] July, 2011.

Kren, L 2005, Managerial Accounting, University of Wisconsin – Milwaukee: Maryland.

John, J, W, Barbara, C 2007, “Cost Allocation and Activity-Based Costing Systems”, in Management Accounting, Information and Decisions, Irwin/McGraw-Hill: Boston.

Atkinson, A, Kaplan, S, R, Matsumura, M, E, Young, M, S 2011, Management Accounting: Information for Decision Making and Strategy Execution, Pearson Education: London.

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