Task 1 Investigate and report 5 pages on an...

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Electrical Wiring Residential
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Chapter 29 / Exercise 13
Electrical Wiring Residential
Mullin/Simmons
Expert Verified
Project 1 Task 1 Investigate and report (5 pages) on an organisation’s method of allocating electricity costs. You can use any organisation with which you are familiar. Consider the following: 1. Does the organisation allocate the total cost of electricity? 2. If so, what is the basis for the allocation of the total cost of electricity incurred for a period? 3. Calculate the percentage and cost of the total cost for each allocation. Complete a report that you could provide to management about your findings and include within it an executive summary. Make recommendations to management about the appropriateness of the methods of allocating costs and provide reasons for your conclusions within the report. Australian Harbour International College, 114-120 Castlereagh Street, Sydney NSW 2000, Australia |RTO NO: 41338 | CRICOS Provider Code: 03449J File Name: FNSACC507 Provide management accounting information Version 2.0/ August 2017 Review Date: February 2018 Page 1 of 12
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Electrical Wiring Residential
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Chapter 29 / Exercise 13
Electrical Wiring Residential
Mullin/Simmons
Expert Verified
Cost allocation is the process of identifying, aggregating, and assigning costs to cost object. A cost object is any activity or item for which you want to separately measure costs. Cost allocation is used for financial reporting purposes, to spread costs among departments or inventory items. Cost allocation is also used in the calculation of profitability at the department or subsidiary level, which in turn may be used as the basis for bonuses of the funding of additional activities. Cost allocations can also be used in the derivation of transfer prices between subsidiaries. Cost allocation is important because it the process through which costs incurred in producing a certain product or rendering a certain service is calculated. If costs are not accurately calculated, a business might never know which products are making money and which ones are losing money. If cost are misallocated, a business may be charging wrong price to its customers and/or it might be wasting resources on products that are wrongly categorized as profitable. Corporate profile : 1. ABC company is a candy manufacturer in Thailand. 2. ABC company has 2 production lines ; a. Soft candy b. Hard candy 3. Amount of Electricity to be allocated was $55,000. 4. ABC company prefer to allocate electricity costs to its two products. 5. Allocation Method ; a. Electricity Costs are allocated based on direct labor hours in each line production. Description Soft Candy Hard Candy Direct Labor Hours 1,500 Hours 2,000 Hours Revenues $ 350,000 $ 450,000 Production Capacity 70,000 Kg. 90,000 Kg. When allocating costs, company must ensure that the costs are reasonable and have appropriate documentation. The allocation method must be reasonable and must Australian Harbour International College, 114-120 Castlereagh Street, Sydney NSW 2000, Australia |RTO NO: 41338 | CRICOS Provider Code: 03449J File Name: FNSACC507 Provide management accounting information Version 2.0/ August 2017 Review Date: February 2018 Page 2 of 12
relate to the costs being charged. The documentation must show that the allocation method reflects project benefit in the percentages or amount indicated.

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