Cost Accounting Proposal Essay Example | Topics and Well Written Essays - 500 words

Cost Accounting Proposal - Essay Example Such things as raw materials would not be included on the balance sheet because it is non-existent. Some intangibles might be included as well. Another area of consideration is the income statement, which would include such items as expenses, marketing, net income, purchases, and beginning and end inventory. Monitoring and measuring capacity utilization and productivity levels on a continuous basis will ensure streamlined operations, resulting in an increase of return of investment for the parent company. Efficient operational activities lessen the total costs that must be allocated to the final product, increasing overall profitability and growth potential for the newly formed online business unit. There are various cost allocation methods that one could use to allocate cost. Three methods commonly used are the direct method, the step method and the reciprocal method. The direct method focuses on charging cost of support service departments to internal customers. This method does not make allocations among support-service departments. A disadvantage of this method is it does not take into account that the services that one department may provide support to another and cause higher cost allocations to the production department.