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Assignment Guidelines:

• Add a section to your paper, outlining how you would implement capital budgeting in your company.
• Prepare an example of a decision that you would make using either the IRR or Payback method of analysis. Why would you use this for your business?

Must be in APA format 

Must have in text cite

must have 3 references

Watch grammer and spelling

* Total paper 1800 words this includes what was already written

  Word document of 1,800 words; may include some calculations embedded from Excel 

This professor is tough

Running Head:

Cost Allocation

for Barnes Company

Cost Allocation for Barnes Company

Cost Allocation for Barnes Company 3

Cost Allocation

Charlotte Valenzuela

Cost Accounting ACCT351-1801A-02

Professor: Linn Sheik

January 30, 2018

Cost Allocation

Introduction

In order for a firm to effectively understand the value that comes from their outputs and inputs in a production process, they have to incorporate the use of manufacturing costing methods which account for the costs incurred. The tracking and categorizing of both input and output data guides the decision making of a company with a high accuracy degree on the cost per unit of production together with other key performance indicators (Fisher, 2016). Such information is pivotal in the making of informed decisions that revolve around future investments, competitive strategies, pricing and production levels

Costing Methods for Barnes Company

Barnes Company is a firm that deals with the manufacturing and selling of digital music players which for a long time have been in high demand compared to the traditional music players in the industry. The inputs required in the production of these high-end music players are inclusive of Wi-Fi hardware for streaming purposes and a finger scanner among other items. The company has a workforce of about 11 employees who help in the manufacturing of the digital music players. The expenditure used in the production are as follows:

1. Labor per unit cost is at $ 16 per cent,

2. Material costs are at $11 per unit

3. Overhead cost per unit is at $ 8 per unit.

This, therefore, means that the overall cost of the high-end digital camera is 35$

Determine the selling price.

With attribution being made to the cost analysis, the selling price of the high-end camera will be placed at 100$. The total production cost for the high-end digital camera is at 35$ with the company expecting to gain a profit margin of about 65$.

Overall expenditure per unit $35

Expected proceeds $68

Selling price $100

Addendum to this, many firms producing such cameras price their products within the range of about 92$ up to 115$ but a keynote has to be made on the fact that the price of 100$ in such a market is consistent considering the competitive prices and overall consumer demand. The price is also up to par as it considers the costs incurred during the production and the market value.

Overall Production Set to Meet the Selling Price.

The company has to produce extra units of the digital music players so as to meet the overall selling price. The labor costs calculated for their 11 employees in order to produce about 1000 units stand at 16000$ with the outstanding production cost standing at 35,000 dollars. The costs will be outlined as below:

Material cost 11$ per unit * 1000 = 11000

Labor per unit cost $ 16 per cent* 1000= 16000

Overhead cost per unit $ 8 per unit*1000= 8000

Total costs of production $35,000

The above calculations pinpoint the production costs and items needed in order to meet the standards for setting the prices for sale.

Costing systems, in my opinion, the job costing system works in tandem with the goals set by Barnes Co. the costing system incorporates the use of computation for the costs and selling price with reference being made to the main cost segment. The cost factors may include overhead costs, labor costs, and material costs. This is important in the customization of the selling price for the digital cameras due to the company’s ability to effectively identify the different sections of cost (Zimmerman, 2012). One has to take keynote however of the fact that job costing systems are pivotal in the production of the company which aims at producing goods as the whole batch. The system is most likely used in the accumulation of cost processes as it offers the management with the necessary data and information for the implicated costs. Aside from all that, it is important in the formulation and implementation of projects that are labor-intensive especially for a firm that prides itself on the manufacturing of high-end cameras. There is a myriad of cost systems in the accounting world today like ABC costing and Process costing but they do not conform to the accounting system in the firm. Process costing accounting is normally used in the calculation of costs incurred during the continuous production of goods. It tends to allocate the costs after the main productions are obtained. ABC costing systems on the other hand assign costs with reference to the overhead expenditure in the cost collection which means it might be complex to distinguish the individual costs segments. The job offer system is, therefore, the most effective method of cost assignment by the Barnes Company.

Ethical considerations

Choosing among the various accounting costing methods has to be one of the hardest tasks that can ever face the accounting department of a firm basing on the ethical concerns that rotate around each and every method. To begin with, many times the firm is faced with the issue of conflict of interest in the management whereby the accountant in the firm violates the company’s culture in order to pursue their personal desires and interests (Zimmerman, 2012). Firm managers are expected to act in a particular manner that aligns itself with the interests of the company. It is imperative for the firm to review the policy that deals with asset replacement as it might help in the influencing of the returns made by the firm unethically (Noreen, 2011). The accountants are also expected to review the equipment used in the accounting of the costs and also offer subsequent recommendations for the replacement of the assets. This is duly because a new asset is expected to lead a lower return on the overall investment policy. Another ethical concern for most firms is the issue of cost allocation whereby the accountants tend to shift the costs from the income statement to the contracts formulated (Fisher, 2016). Take a case example, any cost allocation which is not in any way appropriate will adversely affect the formulation of financial statements and can lead to a strained relationship between the company and its clients.

Conclusion

Cost accounting is changing continuously as the years go by with the overall aim of the various methods being to answer the questions posed by the management of a firm. The management of each and every firm has to focus primarily on the customer’s growing expectations, international business process, and the changing global market. It is in dire need that they implement accounting methods that align with their company objectives while ensuring that they meet the needs of their clients.

References
Fisher, J. G. (2016). Product costing systems: Finding the right approach. Journal of Corporate Accounting & Finance, 13-21.
Noreen, E. W. (2011). Managerial accounting for managers. New York: McGraw-Hill Higher Education.
Zimmerman, J. L.-Z. (2012). Accounting for decision-making and control. Issues in Accounting Education, 258-259.

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